Tuesday, 16 March 2021

Michael Hudson weeps and wails about household debt.

Household Debt Service Payments as a Percent of Disposable Personal Income, 1980-2020:

A large majority of the population are susceptable to emotional appeals and pretty much indifferent to facts or reality. And that certainly applies to the numerous articles advocating a debt jubilee: i.e. you only need to spin stories about impoverished households being up to their eyes in debt, and most people will back your debt jubilee proposals. After all, the word “debt” itself is an emotionally charged word.

A recent article by Michael Hudson and others falls into the latter “emotional” category. It’s entitled “It Is Time to Remove the Debt Barrier to Economic Growth.”

The second paragraph claims “….the indebtedness of the population means there is little discretionary income with which to drive the economy.” Now there’s just one teensy problem there, which is that one person’s spending must be someone else’s income. In the case of interest payments, interest payments by debtors must equal interest receipts by creditors (plus payments to staff at banks and similar which organise loans).

It could of course be argued that total household spending by less well-off households is more sensitive to changes in their monthly outgoings than that of better off households, and hence that a rise in interest payments will cause a decline in aggregate demand. But Hudson & Co do not actually say that!

Moreover, if demand DOES FALL for the latter reason, there is no reason government and central bank can’t boost demand via the usual fiscal and/or monetary measures (e.g. Biden type stimulus cheques).

But in any case, the latter points are irrelevant because household debt service costs as a proportion of household income is at a record 40 year low as shown in the above chart..!!! But the later chart sets out a FACT, which as I said above is not something that is of much interest to many people.




  1. Ralph,
    John Cochran is still clueless about macroeconomics. See his back to 60s. Take the p*ss out of his blog, please.

    1. What "back to the 60s"?? I've been following Cochrane's blog for years and find abaout 95% of his stuff OK. I've known him make a few bad mistakes, but we all do that..!!!


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