[OPE] Michael Hudson on debt repayment

From: Jurriaan Bendien <adsl675281@tiscali.nl>
Date: Sat Feb 14 2009 - 18:53:40 EST

The officials drawn from Wall Street who now control of the Treasury and Federal Reserve repeat the right-wing Big Lie: Poor 'subprime families' have brought the system down, exploiting the rich by trying to ape their betters and live beyond their means. Taking out subprime loans and not revealing their actual ability to pay, the NINJA poor (no income, no job, no audit) signed up to obtain "liars' loans" as no-documentation Alt-A loans are called in the financial junk-paper trade.
            I learned the reality a few years ago in London, talking to a commercial banker. 'We've had an intellectual breakthrough,' he said. 'It's changed our credit philosophy.'

            'What is it?' I asked, imagining that he was about to come out with yet a new magical mathematics formula.

            'The poor are honest,' he said, accompanying his words with his jaw dropping open as if to say, 'Who would have guessed'?

            The meaning was clear enough. The poor pay their debts as a matter of honor, even at great personal sacrifice and what today's neoliberal Chicago School language would call uneconomic behavior. Unlike Donald Trump, they are less likely to walk away from their homes when market prices sink below the mortgage level. This sociological gullibility does not make economic sense, but reflects a group morality that has made them rich pickings for predatory lenders such as Countrywide, Wachovia and Citibank. So it's not the 'lying poor.' It's the banksters' fault after all!

            For this elite the Bubble Economy was a deliberate policy they would love to recover. The problem is how to start a new bubble to make yet another fortune. The alternative is not so bad - to keep the bonuses, capital gains and golden parachutes they have given themselves, and run. But perhaps they can improve in Bubble Economy #2.

            The Treasury's newest Financial Stability Plan (Bailout 2.0) is only the first step. It aims at putting in place enough new bank-lending capacity to start inflating prices on credit all over again. But a new bubble can't be started from today's asset-price levels. How can the $10 to $20 trillion capital-gain run-up of the Greenspan years been repeated in an economy that is 'all loaned up'?

            One thing Wall Street knows is that in order to make money, asset prices not only need to rise, they have to go down again. Without going down, after all, how can they rise up? Without a crucifixion for the economy, how can there be a resurrection? The more frenetic the price fibrillation, the easier it is for computerized buy-and-sell programs to make money on options and derivatives.

            So here's the situation as I see it. The first objective is to preserve the wealth of the creditor class - Wall Street, the banks and the other financial vehicles that enrich the wealthiest 1% and, to be fair within America's emerging new financial oligarchy, the richest 10% of the population. Stage One involves buying out their bad loans at a price that saves them from taking a loss. The money will be depicted to voters as a 'loan,' to be repaid by banks extracting enough new debt charges in the new rigged game the Treasury is setting up. The current loss will be shifted the onto 'taxpayers' and made up by new debtors - in both cases labor, onto whose shoulders the tax burden has been shifted steadily, step by step since 1980. http://www.globalresearch.ca/index.php?context=viewArticle&code=HUD20090211&articleId=12265

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Received on Sat Feb 14 18:58:48 2009

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