Posted 2 years ago on May 10, 2018, 4:04 p.m. EST by agkaiser
from Fredericksburg, TX
This content is user submitted and not an official statement
Americans beware! You've been conned. The long exerpt below is the heart of a recent essay by Michael Hudson. The post [at NC] exposes several other facets and much of the history of the great con. What follows puts the foremost seduction on display.
[note: Sadly, like much of Hudson's writing, great insight is marred by typos and inadequate editing. You should read the entire article but you'll have to look beneath a lot of surface flaws.]
"... Most private fortunes in the West have stemmed from housing and other real estate financed by debt. Until the 2008 crisis the magnitude of this property wealth was expanded largely by asset-price inflation, aggravated by the reluctance of governments to do what Adams Smith, John Stuart Mill, Alfred Marshall and nearly all 19th-century classical economists recommended: to keep land rent out of private hands, and to make the rise in land’s rental value serve as the tax base.
"Failure to tax the land leaves its rental value “free” to be pledged as interest to banks – which make larger and larger loans by lending against rising debt ratios. This “easy credit” raises the price of obtaining home ownership. Sellers celebrate the result as “wealth creation,” and the mainstream media depict the middle class as growing richer by higher prices for the homes its members have bought. But the debt-financed rise in housing prices ultimately creates wealth mainly for banks and their bondholders.
"Americans now have to pay up to 43 percent of their income for mortgage debt service, federally guaranteed. This imposes such high costs for home ownership that it is pricing the products of U.S. labor out of world markets. The pretense is that using bank credit (that is, homebuyers’ mortgage debt) to inflate the price of housing makes U.S. workers and the middle class prosperous by enabling them to sell their homes to a new generation of buyers at higher and higher prices each generation. This certainly does not make the buyers more prosperous. It diverts their income away from buying the products of labor to pay interest to banks for housing prices inflated on bank credit...."