With every major financial recovery since the second World War beginning in a place of greater debt than the one before it, how could we not have foreseen the financial crisis of 2008? In this episode of Meet the Renegades, economics professor and author, Michael Hudson argues we did.
How could an economy that created so much debt also save the banks rather than the economy itself, following the 2008 financial crisis? Michael discusses the phenomenon of debt inflation and how the economic curriculum should change.
“If you’re teaching economics, you should begin with the relationship between finance and the economy, between the build up of debt and the ability to pay.”
Michael discusses the ‘Great Moderation’, a common misrepresentation of a healthy economy in which job productivity was increasing, labor complacency was at an all-time low was a complete myth. Michael argues that ‘traumatized’ workers were too in debt to fight for better working conditions leading up to the 2008 financial crisis and how this reflects neo-classical ideas.
Michael offers solutions – urging the importance of writing down the debt and keeping basic services in the public sector, ridding the economy of financial tumors through a proper tax policy based upon the this public sector model.