Niall Ferguson has just made the first call for widespread debt rescheduling that I have seen published in a major newspaper–today’s Australian, and I am sure it is reproduced in many newspapers around the world (if your local paper is owned by News Limited, there’s a good chance that you will find it there).
The article is linked here–The great repression–and some excerpts are shown below. Read it and refer your friends to it. Finally the call has gone out that what is needed to get out of this crisis is not more debt, but less.
“There is something desperate about the way people on both sides of the Atlantic are clinging to their dog-eared copies of Keynes’s General Theory. Uneasily aware that their discipline almost entirely failed to anticipate the crisis, economists seem to be regressing to macro-economic childhood, clutching the multiplier like an old teddy bear.
The harsh reality that is being repressed is this: the Western world is suffering a crisis of excessive indebtedness…”
“The idea of modifying mortgages appalls legal purists as a violation of the sanctity of contract. But, as with the principle of eminent domain, there are times when the public interest requires us to honour the rule of law in the breach. Repeatedly in the course of the 19th century, governments changed the terms of bonds that they issued through a process known as conversion. A bond with a 5 per cent coupon would simply be exchanged for one with a 3 per cent coupon, to take account of falling market rates and prices. Such procedures were seldom stigmatised as default. Today, in the same way, we need an orderly conversion of adjustable rate mortgages to take account of the fundamentally altered financial environment.
No doubt those who lose by such measures will not suffer in silence. But the benefits of macro-economic stabilisation will surely outweigh the costs to bank shareholders, bank bondholders and the owners of mortgage-backed securities.
Americans, Churchill once remarked, will always do the right thing – after they have exhausted all the other alternatives. But if we are still waiting for Keynes to save us when Davos comes around next year, it may well be too late. Only a Great Restructuring can end the Great Repression. It needs to happen soon.”
I think gold is expensive in comparison to other commodities. I think better value is found elsewhere. I think gold will reach somewhere around 12500 dollars if US interest rates were to go as high as in 1980. (21.5 %).
i have looked at fixed things such as railroad. CP, canada pacific is at the same price now, as at the market top in 1929. Change have happened to the company since then, but it’s cheap. Other things are cheap. I have looked at shares such as Kodak, they to is not far from their 1929 price level.
Hehe. Another thought to add to the topic soup. I’ve changed my mind about Hydrogen. How about Ultracapacitors? Make these work well and *boom* everything changes.
justme
If you do decide to buy Gold and Silver – Silver is very good value – but more violatile – do not put it in the bank – either find a good hiding spot (only you know) or pay for a vault storage – no banks.
This video is an absolute MUST SEE. Michael Hudson has got to be one of the most enlightened economists of our day…right up there with Steve Keen
http://www.youtube.com/watch?v=3pwAFohWBL4&eurl=http://www.itulip.com/
Agreed. Michael and I spoke at the same session of the 2006 Post Keynesian conference, and we now correspond regularly. He’s an expert on antiquity economics as well as modern, having originally been an archeologist. And he worked on Wall Street as well, so his knowledge of the system is both academic and practical.
It’s an excellent interview that everybody who visits this site would enjoy.
GSM – your analysis on Storm Financial is spot on
I agree with Prof. Hudson on most points but not sure about the debt forgiveness part. The best means of debt forgiveness is bankruptcy and if anything we could modify the bankruptcy laws in Australia where the person in debt can walk away from their home and start with a clean slate. But they can’t keep their home as this would have unintended consequences as is being found out in the US; ie. the system breaks down as people realize that it’s good to be in massive debt as you will be forgiven.
Otway-Jack, I agree with you mate! I have lost my job!I and others are supposed to bail out those that caused this? what the? Why? I did ask a question here some time ago about nationalising our banks and governing for all of us,not just minority sectional interests (banks and finance houses,only then can we maybe start to sort out all debt, reorganise the economy based on ‘our way’look after those least able to look after themselves, unemployed, pensioners (with priority)and re set the ‘financial rules’ for the future,i.e. savings;work (there is a lot to be done in ‘oz’,we are still a young country)Australian production by Australians for Australians,we can do anything we want to,we have the brains,the people and more importantly all the natural resources we need (for ourselves).
If only it were that easy Tommy, We never had a large manufacturing base here in Australia and I don’t think we can grow one with our dynamics. Low population combined with a high standard of living work against it being profitable to make consumer goods here. Also our environmental laws are too strict to allow further processing of resources we dig up. I certainly agree we have the ability to produce whatever we want, it just isn’t profitable, instead I think we should look to we can do profitably and I think it is in research and design making money off products we invent or improve which are manufactured overseas by Aussie owned companies. Work smarter, the CSIRO is a great example of what we can achieve if we Aussies use our brains more!!
It is all looking very Japanese, as in the aim of economic policy is to stop people losing their houses and banks from going bust, resulting in a huge public debt. Of course we now know that eventually it all goes wrong anyway.
I have nothing against the sort of debt moratoria that allows people to buy time or actually saves the banks money by avoiding some foreclosures (America already has these, some banks actually decide that it is better not to foreclose) but eternally propping up dodgy loans seems a losing proposition.