YouTube has the video The Radical Imagination | Imagining How Financial Parasites and Debt Bondage Are Destroying Us.

Host Jim Vrettos interviews Michael Hudson, Economic Historian who offers his views in regards the impact that the COVID-19 pandemic is having in the US economy.

Naked Capitalism has the transcript in the article Finance Capitalism vs Industrial Capitalism: How Financial Parasites and Debt Bondage Are Destroying Us

Michael Hudson lays it out as plainly as you are going to hear it.

Naked Capitalism has posted an extensive transcript titled Max Blumenthal and Ben Norton With Michael Hudson: US Coronavirus “Bailout” Is a $6 Trillion Scam.

MICHAEL HUDSON: No, the Federal Reserve was given special powers to create 10 times as many loans or swaps as others. The Federal Reserve represents the commercial banks and commercial investors.

Now here’s the problem: a lot of companies were issuing junk bonds. They were going way down in price, especially junk bonds for the fracking industry. The Federal Reserve says, “We’re going to be backed up by the Treasury. We can just create — as you know, Modern Monetary Theory — we can just create money on a computer, and swap. So we will, say, ‘Give us your poor.’ It’s like the Statue of Liberty: ‘Give us your poor, your oppressed,’ or Aladdin’s old lamps for new: Give us your junk bonds, and we will give you a bona fide Federal Reserve deposit.”

Here are the audio/video/transcript source from the original Transcript – US coronavirus ‘bailout’ scam is $6 trillion giveaway to Wall St – Economist Michael Hudson explains.

A meme that is running around on the internet these days has prompted me to write this post.

No business can afford to plan for a rainy day. Any company that has a large rainy day fund will be raided by vulture capitalists so that the vulture capitalists can pocket the rainy day fund.

The rules that allow corporate raiding are the very rules that need to be changed to make our “capitalist” system work again.

I think much of the current environment was created by Michael Milken. WikiPedia has the details that are relevant.

By the mid-1980s, Milken’s network of high-yield bond buyers (notably Fred Carr’s Executive Life Insurance Company and Tom Spiegel’s Columbia Savings & Loan) had reached a size that enabled him to raise large amounts of money quickly.

This money-raising ability also facilitated the activities of leveraged buyout (LBO) firms such as Kohlberg Kravis Roberts and of the so-called “greenmailers“. Most of them were armed with a “highly confident letter” from Drexel, a tool Drexel’s corporate finance wing crafted that promised to raise the necessary debt in time to fulfill the buyer’s obligations. It carried no legal status, but by this time, Milken had a reputation for being able to make markets for any bonds that he underwrote. For this reason, “highly confident letters” were considered to reliably demonstrate capacity to pay.^[23][24] Supporters, like George Gilder in his book, Telecosm (2000), state that Milken was “a key source of the organizational changes that have impelled economic growth over the last twenty years. Most striking was the productivity surge in capital, as Milken … and others took the vast sums trapped in old-line businesses and put them back into the markets.”^[25]

Amongst his significant detractors have been Martin Fridson formerly of Merrill Lynch and author Ben Stein. Milken’s high-yield “pioneer” status has proved dubious as studies show “original issue” high-yield issues were common during and after the Great Depression. Milken himself points out that high-yield bonds go back hundreds of years, having been issued by the Massachusetts Bay Colony in the 17th century and by America’s first Treasury Secretary Alexander Hamilton. Others such as Stanford Phelps, an early co-associate and rival at Drexel, have also contested his credit as having pioneered the modern high-yield market.^{[citation needed]}

I read “productivity surge in capital” as meaning doing away with the “wasteful” activities of “saving for a rainy day”. Other “wasteful” activities might include providing adequate funding of pension plans, and paying workers a decent wage. These type of “wasteful” activities might be what Nicholas Nassim Taleb calls making systems anti-fragile. Doing away with these activities makes a company more “efficient” and “productive” in the short term, but makes a company highly susceptible to going under in a “black swan” event that could not have been foreseen.

I also note that “and others took the vast sums trapped in old-line businesses and put them back into the markets” were not “trapped” under a mattress in old-line businesses. If the funds were held in bank accounts or in bonds, the money was already being recirculated in loans that the banks made or use that the bond sellers made of the proceeds from selling bonds.

From the WikiPedia antifragility article we have the following:

Antifragility is a property of systems that increase in capability to thrive as a result of stressors, shocks, volatility, noise, mistakes, faults, attacks, or failures. It is a concept developed by Professor Nassim Nicholas Taleb in his book, Antifragile, and in technical papers. As Taleb explains in his book, antifragility is fundamentally different from the concepts of resiliency (i.e. the ability to recover from failure) and robustness (that is, the ability to resist failure). The concept has been applied in risk analysis, physics, molecular biology, transportation planning, engineering, Aerospace (NASA), and computer science.

I was thinking that there could be an organization (the Federal Government?) where a company could put its rainy day fund such that the funds cannot be released back to the company unless they are used for an actual rainy day, not to line the pockets of the executives, corporate raiders, nor stock holders. Actually, I suppose the current system of government bailouts of corporations is a form of having the rainy day fund in the hands of the government (more likely the hands of the Federal Reserve Bank which has no Congressionally mandated policy for how to disburse the rainy day funds).

YouTube has the video The Federal Reserve Picking Winners/Losers During Crisis.

If only Jimmy Dore could spend more time understanding Modern Money Theory.

Modern Money Theory lays the explanation out for all of us. People want to treat MMT as a mystery that can’t possibly be true. The Fed is controlled by Congress. Congress can change the rules if they want to. The way you vote for the people in Congress is your mechanism for controlling the Fed. If you don’t know that you want Congress to do, then you won’t be able to demand that they do what they ought to. Besides knowing that the Fed should be audited, Ron and Rand Paul have no clue about what to do with the information that will come out. They do not understand MMT.

If you are interested, there are posts about MMT all over this blog.

Even without the Fed, financial staying power helps the rich get richer. A great example is the Great Depression. As everybody was losing all their assets in the stock market crash, the dust bowl, and loss of jobs, they were forced to sell whatever they had at the proverbial fire sale prices. Those who had enough money to buy these assets cheaply saw tremendous gains in wealth when the economy recovered and the value of those cheaply bought assets skyrocketed. Every time the economy goes through such a cycle, the rich get richer and the poor gets poorer. The only thing that equalizes the situation is a highly progressive income tax system with top rates at 90% or more. There should also be wealth tax along with an income tax. Increasing amounts of wealth that are never turned into realized income gives the owner economic power. That is why an income tax alone is not enough.

Project Syndicate has the article The Myth of “Helicopter Money”.

MMT merely underscores the fact that the Fed faces no financial constraints on its ability to buy assets or lend; it does not prescribe any particular action in this direction – and indeed is skeptical of such policies.

Here is a simple explanation of MMT that the doubters will refuse to believe. The trouble with these explanations is that there is no interaction with the reader to handle the inevitable questions that they want to ask. If you want to ask questions, I will be willing to tell you what I think in my own words, Some MMT experts don’t like the words I use, but I think they make the point better than some experts do.

Use my Facebook post to ask questions.

New Economic Perspectives has the article Manhattan Project to prevent Hyper-Inflation.

This is not, however, what is happening now with the fight against the Coronavirus—and the desperate effort by governments to put money in the pockets of people who can’t work and businesses who can’t open their doors to customers. So, while we’re discovering first hand and in real-time that, yes, sovereign currency issuing governments can, in fact, just create money so they can spend it—without having to collect it back in taxes, either now or in the future—we are also laying the groundwork for causing the hyperinflations described above: “A significant and general collapse” of our business and employment framework is happening before our eyes, while our government feverishly dishes out cash.

The diagnosis of the problem describes what I worry about. The solutions suggested in the article are misguided. When you give people money to spend, the productive capacity of the country must create the goods and services that people want to buy.

Naked Capitalism has the article Taleb: The Only Man Who Has A Clue,

What is happening right now is not because all the epidemiologists and virologists around the world are wrong, but because they’re asked to make decisons and construct models about something they don’t know nearly enough about.

Call Taleb, Donald, Emmanuel, Shinzo, Angela et al. If you care enough about the lives of your people. I see a lot of rational-looking measures today, in all the lockdown variations, but I also see many countries and states clamoring for peaks to be called, and subsequent calls galore for less stringent lockdown measures. Decisions prone to be taken by politicians and epidemiologists who are -way- out of their league.

Please be careful. Call Taleb. You have nothing -more- to lose.

Here is a video that has a small part of what is in the article.

I was a fool for downplaying the value of DIY (do it yourself) masks. I wish I had been aware of Taleb’s writings on this topic back in January.

The definition of ergodic might help to understand the article.

Ergodic definition is – of or relating to a process in which every sequence or sizable sample is equally representative of the whole (as in regard to a statistical parameter).

June 24, 2021

Naked Capitalism has taken notice of this in the post Nassim Nicholas Taleb Shellacks Bitcoin and Cryptocurrencies.

Nassim Nicholas Taleb has weighed in on Bitcoin and its brethren in a new paper for New York University, Bitcoin, Currencies, and Bubbles, and finds nothing to like. We’ve embedded his analysis below and encourage you to read it in full.

Counter Punch has the article The Use and Abuse of MMT.

Most of this seems correct to me, but some of it seems a little off. This article is coauthored by Michael Hudson, so I shouldn’t be questioning it.

I am still thinking about this claim

The asset-price inflation effect of money creation by banks is thus to exert a downward impact on commodity prices, to the extent that the carrying cost on bank credit reduces the net purchasing power of debtors to buy goods and services.

It does not seem right to me to call the reduction of purchasing power as deflation. Increasing costs for financing does lower the money available to buy what is being financed. However, the price of houses did not decline. The size of the house you could buy for a given amount of money did go down because the price and the cost of financing did go up. The total cost of the house went up, but in some respects the cost of the components, the house itself and the cost of financing, could go in different directions. As the mortgage interest rates dropped, the money a person could afford to spend for the house itself went up.

Harpers has the important and fascinating article How the Anti-Populists Stopped Bernie Sanders.

And so we come to understand the real task before us today: to rescue from the enormous condescension of the comfortable the one political tradition that has a chance of reversing our decades-long turn to the right.

This article is far deeper and broader than I imagined it woulld be judging from its title. I had no idea I had fallen so deeply under the influence of the propaganda against William Jennings Bryant that I have heard, read, and seen in movies over my entire lifetime.

Here is an excerpt that happens to touch on the long history of The Dreaded New York Times being dreaded.

In September of that year, as the contentious presidential campaign unfolded, the New York Times announced the alarming discovery: William Jennings Bryan appeared to be clinically insane. It began with a letter to the paper from an anonymous “alienist,” or psychologist, who examined Bryan’s heredity, his heretofore mediocre career, and his behavior on the campaign trail, and concluded “without any bias” that “Mr. Bryan presents in his speech and action striking and alarming evidence of a mind not entirely sound.” Proof: the candidate was “an apostle of an economic theory without ever having a training in economics.”

New Economic Perspectives has the post Standard Money Theory and the Coronavirus.

It might seem, as we observe the U.S. government “instantly” generating $2 trillion new dollars for direct payments and grants to people and businesses, that the coronavirus pandemic has shed a new light on the authenticity (and necessity) of modern money theory (MMT)

Maybe this explanation will hit home for those who have had trouble accepting the reality that Modern Money Theory describes.

As a multi-degree holding electrical engineer, I have learned quite a bit of physics that my non-science friends and relatives just cannot mentally accept. So I am used to people not being able to accept what is physically true. No matter how obvious the concept seems to me to be, it is so frustrating that people I know are just unable to accept some ideas that are so simple to describe. That inability to comprehend is one of the facts I have learned to accept no matter how hard it is for me to accept. So I get it when the shoe is on my foot.

Here are two examples.

I once tried to explain some of Newton’s laws of motion to my sister.

An object at rest stays at rest and an object in motion stays in motion with the same speed and in the same direction unless acted upon by an unbalanced force.

In her experience everything stopped eventually because of friction. I said, imagine a situation where there was no friction. She could not imagine it.

I once tried to explain to my father how the sound of the crack of a whip was produced.

The crack a whip makes is produced when a section of the whip moves faster than the speed of sound creating a small sonic boom.

My father could not conceive of breaking the sound barrier unless you were flying. I pointed out that the speed of sound in air was about 767 miles per hour. Rocket sleds on rails were capable of moving faster than that. To my father, that made no difference. You could not break the sound barrier while still connected to the earth.