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To the deficit commission, a depression is the solution to the problem, not a problem.

Michael Hudson

The price decline is a result of having to pay debts. That drains income from the circular flow between production and consumption – that is, between what people are paid when they go to work, and the things that they buy.
MICHAEL HUDSON

Debt Income People
You’re having government spending on the economy being cut almost everywhere. That means that the only source of spending for growth has to come from borrowing from the banking system.
MICHAEL HUDSON

Cutting Government Mean
Much higher cost for all the infrastructure that he’s proposing. You could call Trump’s plan “public investment to create private profit”. That’s really his plan in a summary.
MICHAEL HUDSON

Investment Plan Proposing Summary
Nobody prefers to earn income any more, because that’s taxable. Rich people prefer to make capital gains.
MICHAEL HUDSON

Gains Income People
The reason is that every recovery since 1945 has begun with a higher, and higher level of debt. The debt is so high now, that since 2008 we’ve been in what I call, debt deflation.
MICHAEL HUDSON

Debt Deflation Higher Reason
The result of this anti-classical revolution you had just before World War I was that today, almost all the economic growth in the last decade has gone to the One Percent. It’s gone to Wall Street, to real estate.
MICHAEL HUDSON

Decade Economic Real Wall War
New investment and employment fall off, and the economy is falls into a downward spiral.
MICHAEL HUDSON

Downward Economic Employment New Spiral
you’ll load the company you take over with debt. But you don’t have to pay taxes on the profits that you pay out in this way. You can deduct the interest from your tax liability.
MICHAEL HUDSON

Company Liability Over Pay Profit Tax
When I say the economy is shrinking, it’s the economy of the 99%, the people who have to work for a living and depend on earning money for what they can spend.
MICHAEL HUDSON

Gone People Shrinking
I think I’m just going to move out and buy a cheaper house.” So it’s very risky when you have only a 3% or 3.5% equity for the loan. The bank really isn’t left with much cushion as collateral.
MICHAEL HUDSON

Bank Cheaper Cushion House Risky
If the bank goes under, they get to keep all of these salaries and options – and the government will bail out the bank. These guys will take their money and run, which is pretty much what they’re doing now.
MICHAEL HUDSON

Bank Goverenment Guy Mrun
When you say “paying the banks,” what they really mean is paying the bank bondholders. They are basically the One Percent.
MICHAEL HUDSON

Mean Percent Really
This is the sector that backs the political campaigns of senators, presidents and congressmen, and they use this leverage to make sure that their people dominate the Federal Reserve, Treasury and the federal housing agencies.
MICHAEL HUDSON

Conbgression Make Sure Treasury
The problems of 2008 were never cured. The Federal Reserve’s solution to the crisis was to lend the economy enough money to borrow its way out of debt.
MICHAEL HUDSON

Balance House People
Now, suppose that a homeowner puts down only 3% of their own money or 3.5% for the FHA. That means if prices go down by only 3%, the house will be in negative equity and it would pay the homeowner just to walk away and say, “The house now is worth less than the mortgage I owe.
MICHAEL HUDSON

Mean Mortgage Moving Thinking
The other dynamic keeping the stock market up – both for technology stocks and others – is that companies are using a lot of their income for stock buybacks and to pay out higher dividends, not make new investment,.
MICHAEL HUDSON

Engineering Government Technology

To the deficit commission, a depression is the solution to the problem, not a problem.

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To the deficit commission, a depression is the solution to the problem, not a problem.

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