I'll have more to say about it tomorrow (probably). For now: I agree with Hudson that the central problem is the growing power of the FIRE (finance, insurance, real estate) sector of the economy, at the expense of the actually productive (industrial) sector. I also note that Hudson repeatedly refers back to the ideas of the original classical economists--I am predisposed to like him for that reason alone. As he says, the key question is WHAT should be taxed. My eyebrows were raised, though, by the following section in Part I of the interview:

MW: Is there a less radical way to keep people in homes which may be too expensive for their incomes or should we be looking for other alternatives?

Michael Hudson: The answer depends on how you define homes as being too expensive. If you're talking about the mortgage's interest-rate jumps and amortization payments being too high to be afforded, then one way to keep them there is a partial write-down of the mortgage loan. Treasury Secretary Paulson already has endorsed a step that remains market-based: to assess what a realistic market price for the property would be, and write down the mortgage to that price.

LeRoy: Assessing 'what a realistic market price for the property would be' is exactly what the markets are struggling with right now!! Who knows how much further home prices will fall? Business Week has a cover story in the most recent issue, warning that the threat of a free-fall in the housing market is growing: "The Home Price Abyss" is the title of the cover story. Scary reading. The idea of 'partial write-downs of mortgage loans' angers me: it has the effect of rewarding ignorant people who made dumb financial decisions...and punishes renters like me, who avoided buying during the housing bubble precisely because we understood what was going on. Such a scheme (for that is what it is) would make it much more difficult to obtain a mortgage loan in the future. Might as well emigrate, in that event. My question is: when will Angelo Mozilo, CEO of Countrywide Financial, which was at the heart of the sub-prime mortgage fiasco, be indicted? Once again, America has seen an almost unbelievable epidemic of corporate crime and financial chicanery---all of it, or very nearly all, stemming from the FIRE sector, which seems to attract crooks like honey attracts bears.

More tomorrow.