Following 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 precipated the sudden free fall. Perhaps the best analysis was offered by Michael Hudson, distinguished research professor of economics at the University of Missouri, Kansas City 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 within the mistaken belief that there would never be a downtourn.
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, in the monopolies benefitting the 1 percent.
Stocks prices have been inflated by the Fed who poured
$4.5 trillion which Wall Street used to generate enromous profits. Pension
funds were able to borrow money at 1% and invested in the stock market with
average yields of 4%. Private companies went on a buyback frenzy driving up
stock prices which triggered huge bonuses to 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 that have an undue influence on
the political process.
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