Real estate - what the banks build their housing bubbles on

I found this description of real estate in a piece by Michael Hudson, who was in turn writing about the forgotten work of Thorstein Veblen who wrote in the late 19th and early 20th Century. The context is the United States and the growth of small towns, but who cares, the story is the same wherever in New Zealand now! Our housing bubbles are built upon the same naked search for something for nothing, what's called 'rents' and 'rent seeking' in economics. What the banks do is just spray financial petrol - credit - upon whatever real estate embers are already smoking.

New Zealand has put public assets into a fire sale

The trick behind a firesale of public assets is to create a false liquidation crisis e.g. by saying NZ is in impossible debt (an 'unsustainable' budget deficit).

The panic this creates, creates the political conditions for public assets to be sold. The outcome of a sale of state owned industrial capital is, like the current liquidation crisis in the wider private sector, for the asset to be sold under valued. The private sector is in crisis because of its indebtedness. Assets sold in the private market are therefore all likely to be undervalued.

WHY MINSKY MATTERS

EconoMonitor : Great Leap Forward » WHY MINSKY MATTERS: Part One by Randall Wray
http://www.economonitor.com/lrwray/2012/03/27/why-minsky-matters-part-one/

"The two most important constraining institutions are the “Big Government” (national treasury) and the “Big Bank” (central bank). The first helps to stabilize the economy through a countercyclical budget: spending falls and taxes rise in a boom, while spending rises and taxes fall in a bust—so surpluses in expansion and deficits in recession constrain the cycle. The central bank can try to constrain lending in a boom (although Minsky was skeptical since profit-seeking banks innovate around constraints), but more importantly it can act as lender of last resort when a financial crisis hits. This prevents a run on financial institutions, which reduces pressure on banks to engage in firesales of assets to meet withdrawals."

Modern Money Theory (MMT)

THE ITALIAN MMT SUMMIT 2012

A PAGE FOR ACTIVISTS COMMITTED TO MAKING MODERN MONEY THEORY GOVERNMENT POLICY IN THEIR COUNTRIES.

Dear International Friends and would-be MMT organizers the world over,

I will not mince words: the Neoliberal, Neoclassical and Neomercantile elites are on the verge of finalizing what amounts to a decades long plan to emasculate sovereign democratic States, their monetary and fiscal powers and us, the citizens.

In other words: DEMOCRACY. The evidence of this unprecedented plundering of entire sections of our societies, of entire States like Greece or Ireland, and of the growing despair among millions of families and even firms is undeniable. No need to comment further. We must act.

The Italian MMT Summit

What is Modern Money Theory

"Barney Frank's campaign slogan 'Neatness isn't everything'  was a great stereotype buster. As to showering with straight military personnel, 'We don't get ourselves dry-cleaned' is pretty great too." - a comment posted here http://www.newyorker.com/online/blogs/newsdesk/2011/11/the-lizza-list-barneys-best-insults.html

Full Employment

"…fundamentally, employment is a basic human right and this principle was enshrined in the immediate post-Second World War period by the United Nations. In 1945, the Charter of the United Nations was signed and ratified by 50 member nations. Article 55 defines full employment as a necessary condition for stability and well-being among people, while Article 56 requires that all members commit themselves to using their policy powers to ensure that full employment, among other socio-economic goals is achieved."
From 'Full Employment Abandoned - shifting sands and policy failures' 2008 - by William Mitchell and Joan Muysken.

The Debt Hammer

I thought these words about austerity economics and the Greek economy were powerful enough to stand on their own.

Socrates said that ignorance must be the root of all evil, because no one deliberately sets out to be bad.

But the economic “medicine” of driving debtors into poverty and forcing the selloff of their public domain has become socially accepted wisdom taught in today’s business schools. One would think that after fifty years of austerity programs and privatization selloffs to pay bad debts, the world has learned enough about causes and consequences.

The banking profession chooses deliberately to be ignorant. “Good accepted practice” is bolstered by Nobel Economics Prizes to provide a cloak of plausible deniability when markets “unexpectedly” are hollowed out and new investment slows as a result of financially bleeding economies, medieval-style while wealth is siphoned up to the top of the economic pyramid.

Greece: No Deal without a National Referendum by Michael Hudson, Global Economic Intersect