Public Comment

Following last Monday’s historic market decline which saw stock prices tumble across the globe, a plethora of economists swarmed onto network media outlets to offer their explanations on the causes which precipitated the sudden free fall. Perhaps the best analysis was offered by Michael Hudson, distinguished research professor of economics at the University of Missouri, and author of the book, "Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy." 

According to Hudson, China’s sudden decline was a direct result of the high volume of small speculative buyers diving into the market with the mistaken belief that there would never be a downturn. 

Conversely, the US market is still a reflection of the 2008 bubble where all the growth in the economy has been principally in the financial sector, benefitting the 1 percent. 

Stocks prices have been inflated by the Fed who poured $4.5 trillion which Wall Street used to generate enormous profits. Pension funds were able to borrow money at 1% and invest in the stock market with average yields of 4%. Private companies went on a buyback frenzy driving up stock prices which triggered huge bonuses for executives. Hudson stated that there has been a divergence between the real economy and the FIRE sector – finance, insurance and real estate. He was pessimistic on the future of the real economy and was highly critical of Wall Street banks who have an undue influence on the political process.