Quote of the Week...

...is from Michael Hudson’s fantastic book, The Bubble and Beyond:

Central bank policies that raise interest rates to slow new direct investment and hiring make economies even less able to carry their debt burden. In this respect the buildup of savings and encouragement of debt financing encourages a buildup of financial returns rather than tangible capital investment. Thus is antithetical to the goal of promoting high wages and rising labor productivity. The rate of interest is permitted to govern the doubling times of savings without the moral, political and religious checks that have rolled back the growth of financial overhead throughout history. There is only one ultimate solution: Debts that cannot be paid, won't be. The open question is, will this tear economies apart as the financial sector fights against fate?

There are clear signs from around the globe that this process is, in fact, tearing economies apart. Despite mass unemployment and declining living standards, many countries continue to support their private financial institutions in the misguided hope that further lending will make households and nonfinancial corporations better able to carry their debt burdens. Until this process is dismantled or reversed, the prospects for sustained economic growth in these countries remains heavily subdued.