Left Out, a podcast produced by Paul Sliker, Michael Palmieri, and Dante Dallavalle,
‘The Hudson Report’ is a Left Out weekly series
Can you explain what the yield curve signifies, and if all these signals I just mentioned are forecasting another economic crisis?
Michael Hudson normally you have to pay a higher rate on the pretense that the interest-rate premium is compensation for risk. Banks and the wealthy get to borrow at lower rates.
Right now short-term rates are even higher than the long-term rates. Unnatural unless you look at what the economy is doing.
The economy’s been in a recession ever since 2008, as a result of what President Obama did by bailing out the banks and not the economy at large.
GDP is up.” but if you look at what they count as GDP, you find a primer on how to lie with statistics. Imputed rents for rising rents that homeowners would have to pay if they had to rent their houses from themselves. That’s about 6 percent of GDP right there.
A result of the 10 million foreclosures imposed on the economy by not writing down the junk mortgage debts to realistic values, companies like Blackstone bought up many of the forfited properties so there are fewer homes that are available to buy. Rents are going up all over the country as homeownership has dropped by abut 10 percent meaning more people have to rent. When more people have to rent, the rents go up and when rents go up, people lucky enough to have kept their homes report these rising rental values to the GDP statisticians. Actually is a rent rise is overhead but it’s counted as rising GDP. That confuses income and output with overhead costs.
The other jump in GDP is paying more money to the banks as penalties and fees for arrears on student loans and mortgage loans, credit card loans and automobile loans.
The statistical pretense is that they’re taking the risk on making loans to debtors that are going bad.
making profits on these bad loans because the government has
guaranteed student loans mortgages loans made by the FHA that the
banks are getting penalty charges on. What’s good for the GDP here is
awful for the economy at large!
This is bad news, not good news.
Investors see that the economy is not growing so they’re bailing out, taking their money and running. There’s only one safe place to put your money: short-term treasuries. You don’t want to buy a long-term Treasury bond, because if the interest rates go up then the bond price falls. So you want buy short-term Treasury bonds. There’s nowhere else to put it in the real economy, because the real economy isn’t growing.
What has grown is debt State and local budgets are broke as a result of pension commitments that exist because politicians cut taxesto get elected.
Commercial property rents are in trouble because as the economy shrinks, stores are closing down and more commercial mortgages owners are in arrears.
If his protectionist policies interrupt trade, you’re going to see companies being squeezed by lower export sales and rising import cost.
Banks are having problems of they hold Italian government bonds because Germany is unwilling to use European funds to bail them out.
Italy may exit the euro increasing the chance of anarchy. So people are parking their money in the short term debt and not investing in economic growth.
So a rise in demand for these short-term Treasuries indicates investors and businesses find too much risk in the economy to invest long-term.
Some think we need not worry near term about a crisis because our regulatory infrastructure is sound compared to before 2008Are the shortcomings of Dodd Frank? Have recent policies the law made us more vulnerable.