From economist Michael Hudson, writing on his blog, discussing his latest book:
Today’s post-industrial strategy of “wealth creation” is to use debt leveraging to bid up asset prices. From corporate raiders to arbitrageurs and computerized trading programs, this “casino capitalist” strategy works as long as asset prices rise at a faster rate than the interest that has to be paid. But it contains the seeds of its own destruction, because it builds up financial claims on the assets pledged as collateral – without creating new means of production. Instead of steering credit into tangible capital formation, banks find it easier to make money by lending to real estate and monopolies (and to other financial institutions). Their plan is to capitalize land rent, natural resource rent and monopoly privileges into loans, stocks and bonds.
This leads the banks to act as lobbyist for their rentier clients, to free them from taxes so that they will have more available to pay interest. The resulting tax shift onto labor and industry adds a fiscal burden to the debt overhead.
