Home » Posts tagged 'real economy'

Tag Archives: real economy

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

Financialization and The Destruction of the Real Economy

September 20, 2017

Financialization and The Destruction of the Real Economy

Strip an economy of capital, productive incentives, talent and yes, ethics, and what are we left with? An economy spiraling toward an inevitable collapse.

Financialization is destroying the real economy, but few in power seem to notice or care. The reason why is painfully obvious: those in power are reaping vast fortunes from the engines of financialization–for example, former President Obama:Obama Goes From White House to Wall Street in Less Than One Year.

This is not to single out President Obama as a special case; politicos across the spectrum depend on the engines of financialization to fund their campaigns and make them multi-millionaires, and corporate managers and financiers have skimmed billions of dollars in gains not from producing new, better and more affordable goods and services but by playing financialization games such as borrowing billions to buy back stocks, leveraged buyouts, and so on–all of which have reaped the insiders gargantuan fortunes while hollowing out the real economy.

Financialization necessarily hollows out the real economy, as Gordon Long and I detail in this new video program: The Results of Financialization – Part I (34 minutes)

The key dynamic is that financialization creates irresistible incentives to ramp up debt and leverage at the expense of the real economy. Those who fail to exploit financialization will underperform the market and be fired.

As Gordon explains, if a CEO refuses to load a company up with debt, a private-equity financier with access to cheap Federal Reserve credit will scoop up the company in a private buyout, fire the management, extract immense profits by loading the company with debt, then take the hollowed-out shell public again, reaping another windfall of financialized gains.

…click on the above link to read the rest of the article…

This is What’s in Store for the Real Economy

March 16, 2016

This is What’s in Store for the Real Economy

There is no escape.

The Census Bureau announced today that total business sales in January did what they’d been doing relentlessly for the past one-and-a-half years: they fell! This time by 1.1% from a year ago, to  $1.296 trillion, and by 5% from their peak in July 2014.

They’re now back where they’d been in January 2013. Sales are adjusted for seasonal and trading-day differences, but not for price changes. And since January 2013, the consumer price index rose 2.8%! This is why the US economy has looked so crummy.

That’s bad enough. But it gets much worse.

Total business sales are composed of three categories: sales by merchant wholesalers (33% of total), by manufacturers (36% of total), and by retailers (30% of total).

Sales by merchant wholesalers took the biggest hit: they plunged 6.4% from January a year ago, to $433.1 billion.

Symptomatic for the lousy state of business investment, sales of professional equipment dropped 4.1% year-over-year, with computer equipment and software sales plunging 10.2%. Sales of electrical equipment, the largest category among durable goods, fell 5.0%. Sales of machinery fell 1.4%. And “misc. durable” sales plunged 8.6%.

The economy’s kick-butt, take-no-prisoners winner? Sales of drugs soared 11.0% to $53.6 billion. As we found out today via Express Scripts Drug Trend Report, those sales increases weren’t caused by people suddenly taking more drugs; they were caused largely by price gouging.

Turns out, prices of brand-name prescription drugs soared 16.2% in 2015! One third of these drugs had price increases of over 20%! On average, they’re up nearly 100% since 2011. This is a patent-protected, monopolistic industry that has managed to rip off every consumer and government in the US. And there’s more. Express Scripts:

Moreover, the industry faced opportunistic manufacturers who exploited monopolies with old generic medications and captive pharmacy arrangements, and ongoing scheming by compounding pharmacies to promote sales of high-priced, no-value compound medications.

…click on the above link to read the rest of the article…

Look Out Below: the Real Economy Just Hit Stall Speed

December 2, 2015

Look Out Below: the Real Economy Just Hit Stall Speed

Look out below, for even with bloated federal spending, the real economy has hit stall speed.

What do we mean when we say the U.S. economy is at stall speed? Stall speedrefers to the air speed and angle of the wing (called the angle of attack) needed to keep an aircraft aloft.

“An aircraft flying at its stall speed cannot climb, and an aircraft flying below its stall speed cannot stop descending. Any attempt to do so by increasing angle of attack, without first increasing airspeed, will result in a stall.”

In layman’s terms, once an airplane’s speed drops to the point that cranking the wing angle up no longer provides enough lift, the airplane stalls out and starts an unintended (and often uncontrolled) descent.

The real U.S. economy (as opposed to the stock market) is at stall speed, and is about to crash into recession. The analogy (via longtime correspondent B.C.) is apt, as the economy is losing speed on multiple fronts.

B.C.’s chart is unique, in that it includes everyone’s favorite stimulus, huge federal deficits: trillions of dollars borrowed from our children and grandchildren to support bloated federal fiefdoms, favored cartels and various bread-and-circuses programs that placate the restive masses.

There are three parts to this chart. Let’s look at them one at a time. The red line is real final sales per capita, which means all sales in the economy adjusted for inflation divided by the population, i.e. per person.

This scrapes away some of the distortions built into gross domestic product (GDP), which is heavily gamed to provide the illusion of “growth.”

Note that real sales have reached lower highs and hit lower lows for the past three decades–they’ve now rolled over, which means the economy is slowing.

…click on the above link to read the rest of the article…

Parasites in the Body Economic: the Disasters of Neoliberalism

October 5, 2015

Parasites in the Body Economic: the Disasters of Neoliberalism

Protesters-gesture-and-wa-004

The following is a transcript of CounterPunch Radio – Episode 19(originally aired September 21, 2015). Eric Draitser interviews Michael Hudson.

Eric Draitser: Today I have the privilege of introducing Michael Hudson to the program. Doctor Hudson is the author of the new book Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy, available in print on Amazon and an e-version on CounterPunch. Michael Hudson, welcome to CounterPunch Radio. 

Michael Hudson: It’s good to be here.

ED: Thanks so much for coming on. As I mentioned already, the title of your book – Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy – is an apt metaphor. So parasitic finance capital is really what you’re writing about. You explain that it essentially survives by feeding off what we might call the real economy. Could you draw out that analogy a little bit? What does that mean? How does finance behave like a parasite toward the rest of the economy? 

MH: Economists for the last 50 years have used the term “host economy” for a country that lets in foreign investment. This term appears in most mainstream textbooks. A host implies a parasite. The term parasitism has been applied to finance by Martin Luther and others, but usually in the sense that you just talked about: simply taking something from the host.

But that’s not how biological parasites work in nature. Biological parasitism is more complex, and precisely for that reason it’s a better and more sophisticated metaphor for economics. The key is how a parasite takes over a host. It has enzymes that numb the host’s nervous system and brain. So if it stings or gets its claws into it, there’s a soporific anesthetic to block the host from realizing that it’s being taken over. Then the parasite sends enzymes into the brain. A parasite cannot take anything from the host unless it takes over the brain.

…click on the above link to read the rest of the article…

How Soaring Housing Costs Maul the Real Economy

May 11, 2015

How Soaring Housing Costs Maul the Real Economy

How many years would it take first-time homebuyers, earning a median household income, to save enough money for the standard 20% down payment on a median home? Are you sitting down?

In many cities an impossibly long time, Lindsay David of LF Economics (and a contributor on WOLF STREET) found. His report on mortgage stress looked at 30 large US cities, using their local median incomes and median home prices. It assumed that young households could accomplish the tough feat of saving 5% of their income, year after year, through bouts of unemployment, illness, shopping sprees, family expansions, or extended vacations.

The results are stunning – if just a tad discouraging for first-time buyers.

In my beloved and crazy boom-and-bust town of San Francisco, where a median home (for example, a two-bedroom no-view apartment in a so-so neighborhood) costs $1 million, it would take – are you ready? – 37 effing years.

Given its higher median income, San Francisco is only in second place. The winner by a few months is another Bay Area city, San Jose. In San Diego, it would take 33 years. In Los Angeles, 32 years. First-time buyers might be retired before they scrape their theoretical down payment together. Theoretical, because in reality, too many things change, and they’re chasing after a moving target.

So lower your expectations and step down to buy a below-median home? Here is whatTwistedPolitix found on the market in that price category:

Yes folks, step right up and get your 700 sq. ft. home in Redwood City, California, heart of the Silicon Valley, for just $649,000! The American Dream! 1 bedroom, 1 bath for just $3,154 per month on a mortgage with super low interest rates if you put down 20%.

If you pay the mortgage back according to the standard 30-year schedule, in April 2045 you will have paid $1,135,721 for a tiny little [bleep] shack. Brilliant!

…click on the above link to read the rest of the article…

One Last Look At The Real Economy Before It Implodes – Part 3

March 21, 2015

One Last Look At The Real Economy Before It Implodes – Part 3

In the previous installments of this series, we discussed the hidden and often unspoken crisis brewing within the employment market, as well as in personal debt. The primary consequence being a collapse in overall consumer demand, something which we are at this very moment witnessing in the macro-picture of the fiscal situation around the world. Lack of real production and lack of sustainable employment options result in a lack of savings, an over-dependency on debt and welfare, the destruction of grass-roots entrepreneurship, a conflated and disingenuous representation of gross domestic product, and ultimately an economic system devoid of structural integrity — a hollow shell of a system, vulnerable to even the slightest shocks.

This lack of structural integrity and stability is hidden from the general public quite deliberately by way of central bank money creation that enables government debt spending, which is counted toward GDP despite the fact that it is NOT true production (debt creation is a negation of true production and historically results in a degradation of the overall economy as well as monetary buying power, rather than progress). Government debt spending also disguises the real state of poverty within a system through welfare and entitlements. The U.S. poverty level is at record highs, hitting previous records set 50 years ago during Lyndon Johnson’s administration. The record-breaking rise in poverty has also occurred despite 50 years of the so called “war on poverty,” a shift toward American socialism that was a continuation of the policies launched by Franklin D. Roosevelt’s ‘New Deal’.

 

…click on the above link to read the rest of the article…

Olduvai IV: Courage
Click on image to read excerpts

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress