I agree with Max in the second video that U.S. wages will be the world average of about $4,000 year. How bad can it get before there is a revolution?
The more I read about economics and banking the better a Public Banking system sounds. At least then debt would be money we owe ourselves.
I ran across both the above videos while reading Getting Dazed and Confused with Paul Krugman
"...approximately one-third of households with mortgages owe more on the mortgages than their houses are worth. The economic implication is that every dollar of mortgage principal repaid is lost savings for the homeowner in proportion to the difference between the original loan amount and the ultimate value of the house. This difference also represents the transfer of these lost savings to the bank that made the loan and that accepted the house that has declined in value as collateral. So who should take the loss, the homeowner or the bank?
Repaying the full loan amount would reduce the savings of the household (reducing lifetime consumption) while rendering the bank whole for risk that they knowingly undertook. When this is aggregated personal tragedy becomes a major economic drag for the next sixty years. But also importantly, given the current state of banking, renewed lending by the banks would go to speculate on financial asset prices, as loan demand for productive investment is non-existent these days.
This asset-price speculation, or in economist Hyman Minsky’s terms, “Ponzi” finance, was behind the most recent financial and economic crises. And until this type of finance is ended there is little chance that Mr. Krugman’s Keynesian prescriptions would be more than temporary patches in a series of ongoing crises. But it also is the reason why not all debt is created equal. Ponzi finance is economically destructive because it is destabilizing, something that Mr. Krugman refuses to acknowledge."
Michael Hudson says in Paul Krugman's Economic Blinders
Mr. Krugman’s blind spot with regard to the debt overhead derails trade theory as well. If Greece leaves the Eurozone and devalues its currency (the drachma), for example, debts denominated in euros or other hard currency will rise proportionally. So Greece cannot leave without repudiating its debts in today’s litigious global economy. Yet Mr. Krugman believes in the old neoclassical nonsense that all that is needed is “devaluation” to lower the cost of domestic labor. It is as if he is indifferent to the suffering that such austerity imposes – as Latin American countries suffered at the hands of IMF austerity plans from the 1970s onward. Costs can “be brought in line by adjusting exchange rates.” The problem thus is simply one of exchange rates (which translates into labor costs in short order). Currency depreciation will (in Mr. Krugman’s trade theory) reduce labor’s cost and other domestic costs to the point where governments can export enough not only to cover their imports, but to pay their foreign-currency debts (which will soar in depreciated local-currency terms).
If this were the case, Germany could have paid its reparations debt by depreciating the mark in 1921. But it did so by a billion-fold and even this did not suffice to pay. Neither neoclassical trade theorists nor Chicago School monetarists get the fact that when public or private debts are denominated in a foreign (hard) currency, devaluation devastates the economy. The past half-century has shown this again and again (most recently in Iceland). Domestic assets are transferred into foreign hands – including those of domestic oligarchies operating out of their offshore dollar or Swiss-franc accounts.
Blindness to the debt issue results in especial nonsense when applied to analysis of why the U.S. economy has lost its export competitiveness. How on earth can American industry be expected to compete when employees must pay about 40 percent of their wages on debt-leveraged housing, about 10 percent more on student loans, credit cards and other bank debt, 15 percent on FICA, and about 10 to 15 percent more in income and sales taxes? Between 75 and 80 percent of the wage payment is absorbed by the Finance, Insurance and Real Estate (FIRE) sector even before employees can start buying goods and services! No wonder the economy is shrinking, sales are falling off, and new investment and hiring have followed suit.