Home > Main > Why Monetary Policy Sucks, Part 2: It promotes debt slavery

Why Monetary Policy Sucks, Part 2: It promotes debt slavery

July 30, 2011

I was thinking a ton about debt slavery during the day, and then my ol’ man beowulf chimed in:

“Michael Hudson’s made the point that banks want property taxes as low as possible so they can expand the share of income they can take in mortgage payments (and other monthly credit streams).”

Yep!  What another bad reason to use monetary policy.

I ended up with a whole list of reasons why monetary policy sucks, and Neil Wilson added another.  There will be another post with that full list.

But this post is about how monetary policy promotes debt slavery.

Monetary policy can only work by giving a middle man – banks and lenders – claims on our future income.  This is the expressed goal of monetary policy – increase or decrease the amount of credit in the economy, and therefore stimulate economic activity.

The primary way the economy expands is by people taking on more debt.

Now, I am not an enemy of debt, but I want to be clear.

The way monetary policy works is through increasing debt in the system.  Monetary policy only works by taking a portion of future income and giving it to banks.  

Of course this is great for the rentier class, but for the economy, not so much.  We’re basically taking an ever larger chunk of our earnings and giving it to lenders.

  • So why do we have a real estate tax exemption?  Higher housing prices for banks to lend against.
  • Why do we have banks pushing for low land taxes?  Higher housing prices for banks to lend against.

Higher prices for real estate means more money for banks and less money for people.  And it isn’t just a one off payment – its a stream of payments over years and years!

This is another big reason why monetary policy is a horrible choice to control our economy.





  1. Tom Hickey
    July 30, 2011 at 11:00 am

    Hudson’s basic point is that economic surplus that is not taxed and recycled goes to rent and ends up at the top, where wealth is power and thus the system falls further into imbalance with inequality increasing, until the debt burdens become unsustainable and crisis ensues. Those with deep pockets are able to buy real assets for pennies on the dollar at the bottom, and the cycle begins again as they distribute these assets on the way up for increasing debt and the rent it provides them. This is how finance capitalism works.

    • TC
      July 30, 2011 at 1:02 pm


      Tom – I wish I had more time to go into this stuff! FinCap works for the rentier class very well, and using monetary policy instead of fiscal policy puts government into cahoots with the rentier class.

      Then when the bust comes – as it must according to Minsky – the rentier class can push the borrowing class into debt slavery and confiscate their assets. It’s a beautiful setup that insures a dwindling middle class.

      I am not anti-capitalism. I just don’t like that we use banks as our method of moderating the economy.

  2. Tom Hickey
    July 30, 2011 at 6:31 pm

    Right. Those on the right see the problem as government. But get rid of government and run a balanced budget and “free market economy,” and all the financial assets in the country by definition come from the banks. This puts the rentier class is complete control economically with no electoral checks and balances. This is a totally stupid idea unless the people pushing are shilling for the rentiers.

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