theprimeinterest on Jul 19, 2013
Here’s what’s in your Prime Interest today:
Insolvent! That would be Detroit, which gave us the Supremes and the vehicles that fueled our happy motoring paradise for decades. Unfortunately, after years of decline, the Motor City finally filed for bankruptcy protection yesterday — a move that was not entirely unexpected. That’s right — $18 billion in liabilities is at stake — a record for the US. Is this the first domino that might just validate Meredity Whitney’s 2011 prediction of a wave of muni defaults?
Perianne digs into the fine print of Detroit’s bankruptcy filing. It’s a precedent-setting event in more ways than one.
And speaking of insolvent, we’d be remiss without mentioning the Fed — which has gamed its own accounting manual to make sure the big banks get paid ahead of the taxpayer. A New York Times article highlights our recent guest Steve Keen and how Bernanke got it so, so wrong. It also provides some choice quotes from a Nobel Prize winning economist. In 2003, Nobel Laureate Robert E. Lucas Jr. actually said macroeconomics “has succeeded: Its central problem of depression prevention has been solved.”
Finally, Detroit might be in the sewer, but that hasn’t stopped Moody’s from upgrading its outlook on US debt from negative to stable. And that triple “A” rating? Still intact. Moody’s actually said the federal government’s debt trajectory is on track — even without further budget measures. Well, you don’t want to get sued like Standard and Poors, right? All’s well that ends well, except we’re just at the beginning of the end of a debt supercycle. Stay tuned, as we talk to Michael Hudson about the bubble economy and the role of the Fed.
[starts at 2:33 minutes into the video.]
Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. His book summarizing his economic theories, The Bubble and Beyond, is now available. His latest book is Finance Capitalism and Its Discontents. He can be reached via his website, firstname.lastname@example.org.