1022 A debt Jubilee for America? Michael Hudson & Paul Craig Roberts

A debt Jubilee for America? Michael Hudson & Paul Craig Roberts

Newsletter published on June 3, 2019

(1) A debt Jubilee for America?
(2) Millennials describe life on the brink
(3) Technology is Deflationary, forcing Wages down

(1) A debt Jubilee for America?

https://www.paulcraigroberts.org/2019/05/06/america-needs-a-debt-jubilee/

posted by Michael  Hudson, Monday, May 6, 2019

America Needs A Debt Jubilee

by Paul Craig Roberts

May 6, 2019

As school children my friends and I were very interested in archaeology
and ancient civilizations. We read all the available books. My best
friend intended to become an archaeologist and to explore ancient ruins
about which we imagined more than we actually knew.

As far as I can discern these days no one in the general population has
any thoughts of Sumer, Babylonia, Assyria, Ur. For the American young
the 1940s, not 2,500 BC, is the ancient past.

A time so long ago that it predates the Old Testament by 2,000 years is
probably imagined as a brutal and politically incorrect time of
inhumanity and human sacrifice. In short, a script for a horror fantasy
movie or a video game.

In actual fact, these civilizations were more advanced and more
humanitarian than our own. They were more advanced because the rulers
were focused on ensuring the society’s longevity by maintaining a
livable balance between debtors and creditors. It has all been downhill
ever since.

The rulers maintained social balance and, thereby, the life of the
society by periodically cancelling debts. The rulers understood that
compound interest resulted in debt growing faster than the economy. The
consequence would be foreclosures on agricultural land, which would
shift riches and power into a small oligarchy of creditors. The ruler
and the society would be deprived of a self-supporting population on the
land which provided tax revenues, soldiers for the military, and corvee
labor to maintain public infrastructure. Disaster would follow. A
grasping oligarchy could overthrow the ruler or the dispossessed
population could flee to a potential invader offering their military
services in exchange for debt forgiveness.

To protect their societies from dissolution by unpayable debts, rulers
periodically cancelled agrarian debts owed by the citizenry at large,
but not mercantile debts among businessmen.

The reason for debt forgiveness was stability, not egalitarianism.

We know this fascinating story of the Bronze Age’s successful economic
policy because Michael Hudson spent 30 years as a research fellow at
Harvard University’s Peabody Museum working with scholars of the ancient
word. The study resulted in the organization of five colloquia over a
decade and in the recent publication of Hudson’s book, ". . . and
forgive them their debts."

In America today the population is drowning in unpayable debts—student
loan debt, credit card debt, home mortgage debt, state and local
government debt, and business debt—but policymakers have reserved
forgiveness only for the debt associated with the bad and irresponsible
investments of the big banks and financial institutions. The Federal
Reserve printed $4 trillion to buy up the banks’ bad debt while
permitting ten million homeowners to be foreclosed. Student loan debt
prevents university graduates from forming independent households.
Mortgage and credit card debt prevents households from having
discretionary income with which to drive retail sales. But modern day
economics has no prescription for preventing our society from failing
from debt overload.

America long ago lost its independent farmers to debt overload. All it
took was a drought, or a dustbowl, or the Fed driving up interest rates
on loans, and farmers were foreclosed and the farm properties passed to
corporate farming. Today the same thing is happening to dairy producers.
Canada’s response to Trump’s tariffs is to place tariffs on US dairy
products. The earnings drop leaves American dairy farmers overburdened
with debt service. This business, too, seems destined to be concentrated
in a few hands. Economic independence is being driven out of American
society.

The problems of monopoly, monopsony, oligopoly are real. Especially so
when indebted Americans have their high productivity, high value-added
jobs offshored and then face robotics displacing the lower paid domestic
service jobs that are their current employment. The profit maximizing
activities of corporations reduce Americans’ incomes but not their
debts. Thus, debt service becomes more difficult.

In the US today we have a situation in which the New York banks control
Federal Reserve policy and financial legislation—the deregulation of the
banking system and its subsequent bailout, for example. We have a
situation in which monopolies, monopsonies, and oligopolies are stronger
than the central government, which is unable to rein them in or act
against them in any way. Corporations dispossess citizens of their jobs
by offshoring the jobs. Creditor demands prevent university graduates
from forming households. Debt service preempts retail demand except by
further debt expansion.

This is an economy headed down, not up. Clearly, Hammurabi did far
better for the Babylonians than Washington can do for Americans.

Buy ...and forgive them their debts
by Professor Michael Hudson:
https://www.amazon.com/forgive-them-their-debts-Foreclosure/dp/3981826027

(2) Millennials describe life on the brink

https://www.wsws.org/en/articles/2019/05/27/mill-m27.html

"It feels like your whole life is a constant crisis"

US millennials describe life on the brink

By Genevieve Leigh

27 May 2019

The following article is the second part of a two-part series examining
the conditions facing working class youth born into the millennial
generation (1981-1996) in the US. Part two contains fuller versions of
the interviews previewed in Part one.

Emma, a 30-year-old from Massachusetts, is a college graduate who works
as a singer and performer.

"I chose to be a performer. I knew that there would be a certain level
of insecurity with that decision, but the fact of the matter is that
these conditions now exist for most everyone I know. I could choose to
do something that I hate and be unstable, stressed out, broke and
miserable. Or I could choose to do something I love and be unstable,
stressed out, broke but at least proud of my work.

"I have held so many jobs it is hard to keep track. Once I worked on a
decommissioned battleship that was turned into a museum (in the food
court). I was a hostess at Hurleys, a counter clerk at an oatmeal
restaurant, a ticket salesman for shows, a theme park performer, and a
cruise ship performer. I’ve done gigs with bands, been a waitress and
other side jobs."

"Working on cruise ships is alright. You are able to save up a little
money sometimes because you don’t have to pay for housing. But you are
still forced to live contract to contract. None of the employees are
‘full time.’ I know three people who have been with the same cruise ship
companies for 10 plus years. They work all the time, but they are still
considered part-time employees. Legally, the standard shift can’t be
over 14 hours a day with a six-hour break, but I have no doubt that
culturally there are things that happen on ships where people are
working far more than that. I have seen some terrible sights: suicides,
employees just jump off the ship. There is a lot of desperation."

Emma explained that not having consistent work means that her health is
a major concern.

"When something hurts or I am sick, I wait a while and see if it will go
away because I am scared to spend a bunch of money to go see a doctor
and have him tell me: ‘drink more fluids.’ But two summers ago, I got
pretty sick, and after a few days it became clear I had something that
was not going to go away. I needed antibiotics. I ended up going to the
doctor and spending $1,200 to treat what turned out to be strep throat.
At the time I was between two contracts with the same company. If I had
been in their facilities, I would have been able to go to a doctor as an
employee. But on the break in between, I am no longer something they
need to worry about."

"Once I had a job with a children's theater, a union job, which paid
$425 a week and a $15 per diem for food. For jobs with my union I get
health insurance, but they make it quite difficult to use. The health
insurance is like a barter system. You don’t get health insurance when
you start the job because you need to accrue weeks. And not every week
counts as a full week of health insurance. For this show they counted 9
performances as one ‘health week.’ But you can only trade it in for
health insurance once you've worked 11 weeks. And to top it all off,
they expire after a year."

"I think for working class millennials, it feels like your whole life is
a constant crisis. The idea of owning a house or buying a new car seems
so far away. You might as well be suggesting I buy my own private island."

Luis is 26 years old, born in 1992, and lives in Southern California.
His parents are both from Mexico. His father is a truck driver and his
mom works in customer service.

"My first job as a kid was doing tile work, mixing cement, when I was
15. I’ve had a job ever since, and I am 26 now. I’ve worked for
electrical engineering companies, Sea World, at Vans shoe store, in
warehouses, at restaurants as a busser and a waiter, in landscaping,
construction, selling motocross parts, as a service salesman, in
shipping and receiving, making aluminum cast molds for bombshells, and
in catering.

"I have held countless jobs, and none of them pay enough to live. I
couldn’t see myself doing any of them for the rest of my life. Some were
miserable, or there was no room to move up with the company, or they
just did not pay enough to cover my bills.

"For people my age, we have to find a job at least over $16 or $17 just
get by. Most jobs start you off at maybe $11 or so, if that.

"It is pretty difficult to make it on your own. I was out living on my
own for about two years renting with a roommate. But then my roommate
came up short on rent two months in a row. I felt bad—I know how it
goes—so I covered him. But it set me back. With the money we make and
the jobs we have, it's just not enough to deal with any minor emergency
or unexpected bill that comes up. I kept having to switch jobs and keep
moving apartments, trying to get by.

"I finally landed my most recent job, which is underground construction,
about two years ago. It is a city job—a prevailing wage job. I was
finally making pretty good money. On a low day I would get $28 to $29 an
hour. I thought ‘finally after all these jobs and all these years trying
to figure out what I was going to do, I can start making a life.’ My
plan was to get my own place, get a new car, and save some money finally.

"But then just two or three months in I got hurt, because of my boss. He
was in a moving vehicle which had poles hanging out. The poles had
cables in them, and they can weigh a couple hundred pounds each. I got
hit by the cables so hard they knocked me down.

"At first they sent me to Urgent Care. But my shoulder kept hurting,
something was wrong. Again and again, they kept sending me back to
Urgent Care. I finally told them I need to be seen properly, by a doctor
in the ER, to get an x-ray. Finally, a month later I got the x-ray, and
it turns out I have a torn labrum in my shoulder. I think it’s
completely messed up how they handled the injury. When someone gets hurt
like that they should go straight to the ER.

"Since then, my hours have been cut drastically. It’s just getting worse
and worse. I am in pain every day. I just got off my dad’s insurance,
but now my job won’t allow me to get on the company insurance even
though they offered it to me when I started. They say it’s because I am
only making 30 hours a week. But they won’t give me more hours because I
am injured. And I can’t fix my shoulder until I get insurance.

"From my point of view, I am in a rut. If I quit, I’ll have to fix my
shoulder on my own, and I don’t have that kind of money. It is crazy.
They injured me, and they won’t help me out.

"Everything I saved I’ve now spent because of the injury. And it took me
years to try to save anything. Now my only focus is just getting fixed
and going from there. I didn’t get an attorney for any extra money or
anything. I just want my surgery covered so I can get better and work.

"We workers all strive to find that decent job so that we can just make
enough to live comfortably. We are working Friday to Friday for a
paycheck, slaving away. I think most people don’t even like what they
do, they just do it for the check. They are trapped, just trying to survive.

"And it’s not just my generation. I have family friends and relatives
who are older than me, and they can’t hardly make it either. And they
have kids too, I can’t even imagine.

"My financial situation affects every part of my life. My friends and I
were just talking the other day about our parents and how they all had
kids at our age. I’d love to travel and do things—things people my age
are supposed to do. But instead I am worried: Am I going to have enough
money for next week? Am I going to be able to pay for just the basics?

"I am not a really political person. But I think everything that has to
do with any type of law is all made up by people who have never been on
the other side. The people in office never have to figure out what they
are going to eat that night and if they are going to pay their bills. It
is pretty messed up. I don’t think it can just keep going like this."

John is 27 from Detroit, Michigan, born 1991. His mom worked for an
insurance agency and his father at a print shop. John graduated from
college in 2015 with a degree in Communications.

"Just like everyone in my generation, I’ve had tons of jobs. I was a DJ,
and a radio host for a local station, and I actually made a fair amount
of money that way. But the royalties ran out, and I had to sell my music
equipment because I couldn’t afford my bills. I worked at Subway for a
couple of months, as a janitor for a paint company, and some other things.

"It’s crazy because my mom had the same job for thirty years, which paid
decently. But jobs aren’t really like that anymore. I’ve never had a job
longer than a year or so. Anything can happen. Everyone is expendable.
They can get rid of you for anything.

"In communications it is difficult to get a job, especially if you have
anything important to say politically. There is a narrow window of
political opinions that are allowed to be aired. I have sort of given up
on my major. I realized that most of the people in my graduating class
and in my major gave up on the field because they couldn’t find jobs. My
experience looking is that it was never about what you know, it was
about who you know.

"And now I am going to be paying anywhere from $280 or so a month [to
pay off debt] for an education I am not using, plus food and other
bills. The student loans take up most of my costs. The last couple
months have been hard. I had to get a wisdom tooth pulled, but I
basically couldn’t afford it. It was ‘impacted’ so it cost more than
usual. I had to choose to take care of it or to pay other bills. I have
to decide each month how much I am willing to spend on the necessities.

"I don’t think I’ll get married or have kids anytime soon. I can barely
afford to support myself. I can’t afford to go out even like I used to.
I don’t really get a chance to meet a lot of new people because all my
time is working or looking for work.

"I know there are tons of people in my generation who suffer from
depression and anxiety. It’s not surprising. What makes it even worse is
when you go see a doctor, they make it so individualized. They make it
out like it’s only you, or there is something wrong with you and not
with the world. ‘Take these pills’ and it’ll be fine or whatever, but
this is a social issue. They make you turn inward, to think ‘maybe it’s
just me, maybe it’s my problem.’

"I feel like that this generation really feels that life can’t go on
like this much longer. We look at the politicians who say, ‘everything
is great, everything is going to be fine.’ And we look at our
conditions— unemployment, massive poverty, and there is a real
dissatisfaction. So many kids that are just angry, and rightfully so. If
that anger is politically mobilized, then it’s game over for the ruling
class."

Andréa is a 25-year-old nonprofit worker from California who graduated
from a university in 2016.

"I didn’t go to Columbia or Harvard. I got a basic education. I was
responsible and stayed local to pay in-state tuition. Now, tens of
thousands of dollars in debt, the lowest my monthly bill can possibly be
is $200 a month.

"My student debt has an impact on every decision I make. Any extra bill
matters. I can’t think about buying a car or getting sick. In the
winter, I had to go to the emergency room. I spent no more than an hour
in the ER. Two months later I got a bill in the mail saying they were
charging me $9,000. I had to spend countless hours on the phone trying
to get it lowered. My friends and family had to send in letters. I had
to apply for all these waivers and such. It was a nightmare.

"Nowadays your money is split so many ways. I feel like all my life
decisions are made in the shadow of my debt. It affects decisions about
starting a family, where and how to live. I honestly feel that there is
not really even room to dream of things like owning a home."

(3) Technology is Deflationary, forcing Wages down

Technology Is Not Just Disruptive, It's Disastrously Deflationary

Deflation eats credit-dependent, mass-consumption economies alive from
the inside.

Authored by Charles Hugh Smith via OfTwoMinds blog,

TUESDAY, MAY 21, 2019

While AI (artificial intelligence) garners the headlines, the next wave
of disruptive technologies extend far beyond AI: as the chart of
technologies rapidly being adopted shows, this wave includes new
materials and processes as well as the "usual suspects" of machine
learning, natural language processing, data mining and so on. While many
voices seek to assure us these technologies won't displace human
workers, the reality is cutting labor inputs is the core driver. What
few pundits seem to understand (perhaps because they've never
experienced a truly competitive market?) is that the rush to incorporate
these technologies into existing enterprises is deflationary not just to
prices but to profits.

Reducing labor inputs and improving productivity of capital and the
remaining labor force is not going to generate profits if competitors
can access the same tools and processes. The race isn't to maximize
profits, it's to survive the inevitable deflationary spiral in prices as
competitors are forced to pass along cost savings to customers to retain
market share.

Pundits glorying in tech profits only consider monopolies or
quasi-monopolies like Apple, Facebook and Google or monopolies / cartels
enforced by government regulations and policies. Markets open to
competition do not enable pricing power beyond a temporary advantage for
one or two product cycles. (Please see Two Intertwined Dynamics Are
Transforming the Economy: Technology and Financialization)

As the race to improve technologies speeds up, "good enough" open source
software and cheap previous-generation hardware is good enough for most
applications. (We can surmise that the Pareto Distribution is active:
technology that is 20% of the cost of the newest product can do 80% of
what the new product can do, and tech that costs a mere 4% of the latest
tech can do 64% of what the latest product can do.)

Everyone counting on trillions in tech profits is overlooking the
inconvenient reality of the S-Curve for cheap credit, cheap energy and
cheap labor--the three drivers of global expansion. Once credit dries up
or becomes more expensive, once cheap energy is only a memory (or future
fantasy) and once employment sags under the pressure to reduce labor
inputs, the ranks of those with the earnings or credit to buy, buy, buy
will be thinned.

Stagnant wages can only be supplemented with borrowed money until the
costs of servicing the debt (interest) eats the borrower's budget. At
that point, lenders will have to face the unpalatable truth that any
additional loan will end in default, a process that will also collapse
the entire unsustainable mountain of debt the household is struggling to
service.

As many others have pointed out, energy can be abundant but it only
drives expansion if it's affordable to low-wage workers. If it's only
affordable to the top 20%, every economy based on mass consumption implodes.

One of the factors in the U.S.-China trade dispute that few seem to
notice is labor costs are spiraling higher in China, reducing its
competitiveness at a critical juncture as global trade, demographics,
energy costs and the risk of credit bubbles bursting all form a
self-reinforcing confluence of negative dynamics.

China still needs the jobs while its customers (including but not
limited to the U.S.) are seeking lower-cost alternatives to Made in
China. Even Chinese companies are looking to establish lower-labor cost
manufacturing hubs overseas.

Strip away the happy talk about technology creating jobs and we're left
with real-world enterprises desperate to lower cost inputs in any way
they can: and the go-to "solution" to reducing cost inputs is reducing
labor inputs by reducing wages via global wage arbitrage (a.k.a.
offshoring jobs) and/or replacing human labor with software and robotics.

Sure, there will be jobs for those installing and maintaining the
software and robots, but remember: enterprises don't have profits, they
only have costs, and the pressure to eliminate entire layers of
managerial costs as well as production costs will only increase. Who
will be willing and able to pay a premium for any technology, product or
service if cheaper alternatives are available? As debt service costs
rise and wages continue to stagnate, the "solution" of borrowing more
reaches an endgame of credit contraction and soaring defaults.

That leaves government-enforced monopolies as the only dependably
profitable corporations, and the citizenry will soon tire of enriching
tech oligarchs who bought political cover and regulatory moats.
Deflation eats credit-dependent, mass-consumption economies alive from
the inside.

Adapt or die boils down to strip out costs or die.