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Rather lose the loan, and have the pound of flesh

By Owen Paine on Sunday September 26, 2010 04:21 PM

This from the daily Yup-it-up bump-and-grind:

"The substantial drop in credit card debt in the United States since early 2009 has been widely attributed to newly frugal consumers. But analysts say that a significant portion of the decline is actually the result of financial institutions writing off billions of dollars in credit card debt as losses."
The code might have been, back in early '09: one if by household default/writeoff, two if by household wage inflation.

Those are the choices if a nation wishes to escape a household debt trap; and which did the Ohbummer redcoats choose?

The route more traveled by, of course: plan one, the slow credit butchering fought much like a war against an insurgency, house by house, clearing the balance sheets ruining the little jerk's credit score one by one.

Plan two? We coulda gone that way. It would involve a massive surge in effective demand through an Avuncular fiscal power play, one that pulled us rapidly up and into ball-tight job markets and triggered that ever-to-be-desired rapidly rising nominal wages.

Gonna happen?

No. The corporate redcoats usually stick to plan one, slow nasty and long as it is, 'cause it works better for them, all things considered.

And since we're still living in corporate occupied territory -- the redcoats rule!

Comments (10)


Don't the laws of capital preclude any rescue at this point? Would it not require a massive shift to public ownership?

Just wonderin' if Plan Two is actually something that any respectable economist (eg PK) could even formulate at the policy level?


"Don't the laws of capital preclude any rescue at this point"

the only worthwhile question

technically no
but that's because the eco profs
use generalized reified models
of at best
a generic credit based commodity economy
(ie one based on poroduction for markets )
not a corporate capitalist economy
a very nasty sub set of institutional arrangements
we mostly have on market earth these days

and you correctly mean precisely that sub set
and are asking could such a full throttle high wagr drive response bust thos instutional arrangements

well that might be so
after enough iterations in enough national economies ...national economies of a leading economy type

but not any one swing thru by any old
national economy

any one national economy of the industrial type
with the political mojo
and a large transfer system and fairly extensive pub sec size measured by usual tax take as percent of gdp
--say 30%)
and if its claimed its for ..just one time ..as an acceptionto normal practice
ala the arsenal of democracy
well it could just happen...
u'd simply
goose up the fiscal thrust enough
to put aggragate demand into hyper drive

example of easiest doing
declare a total tax holiday
at all levels go over completely to borrowing by gubs boprrowing loaning and granting
push up the volume of the transfer system too of course soon enough we'd need wage and price controls
or better a mark up exchange
( see colander's MAP )

plan two is not respectable obviously

but long range over and over
forget about it

for reasons that ultimately require
each other
not just one reason
it can't happen
there is no
king of the blocking reasons
no sine qua non
that would need to be defended
to the last dividend by the corporate ghouls
but any time a national system went into hyper employment mode for 24/7 to the day of judgement
would bring on that day of judgement for itself soon enough

right now national systems can't
effectively control price level dynamics

and they're all inter connected toi each other
in ways that create limits
to financial autonomy
except in the case of a few key national systems like amerika inc

to try to pull a high tech hi fi full credit mode move
going full borrow is out if you want to remain a member of the family of nations

because in the end
as it unfolds all necessary consequences
--import explosion currency collapse etc etc ---
it is tantamount to breaking wto rules
imf rules ..get me ??

because the wto/imf
would stop u exporting products and importing funds soon after your currency collapsed

for just that


that is for anything but raw commodities

and thus you'd become autarkic
in the end
isolated from global tech progress
and devision of labor
like the old soviet camp

a new tech pre Cook australia
but for the use of industrial espionage

that's just one avenue blocker
awaiting you
if you manage to ward off
a civil war ala spain 36

but can pk suggest it in out line

of course he can
he does often talk about
a new arsenal of democracy
recent useage
"arsenal of recovery"

as with much else pk can talk the wolf talk

so long as he supports the lesser evil thesis that is and rants notr about corporate imperialism ala chalmers johnson


Fortunately, relief is on the way. Well, for some folks, anyway....



OP: for once, I admit you couldn't have answered in fewer words. Just wondrin', though, somewhat along greenish and tree-hugger lines, how about bringing corporate taxes into line with the rest of the capitalist world (i.e. making them pay their fuckin' way), even going a little farther than that to drive the bastards off shore to some place like Bahrain, then voluntarily lowering our standard of living in order to pursue rational, universalist social goals, while sneakily encouraging a select few of the technological elite to develop energy efficient systems for us and the entire world, thus making the entire world autarkik on a non-profit basis?

Brian M:

"voluntarily lowering our standard of living" Sounds great.

But who decides what is an appropriate level for the standard of living? By historical standards, four people crammed into a seedy motel room are living large.

How is this going to be enforced, through consumption taxes or sumptuary codes or other forms of pure fiat? "I'm sorry citizen. You have somehow acquired three additional cotton tee shirts. You must be punished!"

Is the decision to be made by some committee of bureaucrats or leftist intellectuals or (horrors) demagogic politicians who, somehow themselves always end up with deluxe dachas on the best coastal beaches? Or will the consumer society, just like "the State" simply wither away?

Note...I would agree that a decline in consumption is inevitable. But I don't see many happy communes in the future. I see Mad Max. Maybe Pinky can be Humungus!

Brian M:

and...of course the biggest question is:

Who decides what these "worthy rational, universalist social goals" are? Do you assume human beings are purely rational and that there can be such a (singular???) set of goals? What is the definition of "worthy"? Are these definitions to be decided by politics, or are we assuming philsopher kings or, perhaps, a wise, just, incorruptible party vanguard comprised of cooperative members and local anarchist book clubs?

Sad Nonny:

Unhappy thoughts:

'four people crammed into a seedy motel room are living large'

By historical standards an individual eating three meals grubs a day is living large.

The environment places limits on species populations. The human species appears to be pushing up against these limits. The nature of the nation state is changing because of the the limits. For a certain class of very large-living observers (not the largest-living), the spectacle of the changes is immensely interesting. We look for historical parallels. We wonder if the limits can be transcended and imagine how that might occur. (The exploitation of the fossil fuel 'birthright' seems to have been the source of the most recent transcendence of limits. Next up: the 'nuclear age', I surmise. But will it transcend or slam humanity into the wall?)

The obvious cheap and quick solution for the species is population collapse. But how to bring it about?

An interesting spectacle, indeed, but only so long as the spectator is living large, above it all.

Brian M:

Sad Nonny, re: the observor


A favorite commenter on another site compared this attitude toward that of fundamentalist Christians eagerly looking forward to (a la the Left Behind novels) watching us sinners being tortured and roasting in hell for eternity.

Sad Crank Nonny:

I don't understand the usage of LOL.

In no way do I eagerly look forward to the evil that seems to be coming. I prefer to see disaster avoided. There are many meliorative suggestions. Either no one knows how to implement them or implementation requires a level of political power that remains and will remain in the hands of those who find the suggestions themselves laughable or who are complacent, not perceiving any urgency... Or insufficient urgency to permit any disruption of business as usual.

Is BAU good enough? It seems unlikely.

Will Gyro Gearloose save us with new technology? This is the most fantastically mystical notion afoot. To steal an idea from Wendell Berry, the faith in new technology is like risking your entire fortune on a spin of the roulette wheel, secure in the belief that, if you loose, a rich uncle, that you have never even heard of, will die and leave you another fortune.

Or maybe I am just old.

Brian M:

Of course I don't either. I am merely enjoying the turn of a phase. It's whistling past the graveyard.

Heck, myself, I am anticipating a Lottery prize to save me from my own irresponsibility. No missing uncles required. Just six magic numbers.

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