When economists speak of money, they neglect that all money and credit is debt. That is the essence of bookkeeping and accounting. There are always two sides to the balance sheet. And one party’s money or savings is another party
MICHAEL HUDSONThe companies aren’t hiring, because consumers don’t have enough money to buy the goods and services.
More Michael Hudson Quotes
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Most people think of the economy as producing goods and services and paying labor to buy what it produces.
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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.
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The myth is that if housing prices go up, Americans will be richer. What banks – and behind them, the Federal Reserve – really want is for new buyers to be able to borrow enough money to buy the houses from mortgage defaulters, and thus save the banks from suffering from more mortgage defaults.
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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.
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When you say “bank,” a bank is a building, a set of computers and chairs and things.
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You have to pay medical care, you have to pay the banks for your credit card debt, student loans. Then you only have about twenty-five or thirty-five percent, maybe one-third of your salary to buy goods and services. That’s all.
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Inflation usually helps the economy at large, but not the 1% if wages rise. So the 1% says that it is terrible.
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Driving down the interest rates creates a boom in the stock market, and also the real estate market. The resulting capital gains not treated as income.
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A bubble is only called that after it bursts, after the insiders get out, leaving the pension funds and small investors, Canadians and other naïve investors holding the bag.
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Today, people are having to spend so much of their money, to acquire a house and to get an education that they don’t have enough to spend on goods and services, except by running into yet more debt on their credit cards and other borrowings.
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To save the banks, you would have to turn the entire Eurozone into Greece.
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Debt deflation is when there’s less money that people have to spend out of their paychecks on goods and services, because they’re paying the FIRE sector. Oil going down is a function of the supply and demand of oil in the market. It’s a separate phenomenon.
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I guess the main thing that came out of the Panama Papers was that Ukrainian President Poroshenko had promised to divest of his chocolate company and instead, he simply moved it into an offshore account.
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In order to be an economist these days, you have to participate in this fairytale that somehow we can recover and still make the banks rich. And it is a fairytale.
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Then, all of a sudden, the Fed can raise interest rates, let the stock market prices collapse and the people will lose even more in the stock market than they would have by the negative interest rates in the bank. So it’s a pro-Wall Street financial engineering gimmick.
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If you want to see where Trump is moving, look at what the United States neoliberals advised Russia to do after 1991, when they promised to create an ideal economy.
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Elites play the role today that landlords played under feudalism. They levy interest and financial fees that are like a tax, to support what the classical economists called “unproductive activity.”
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Education is something that should not be organized on a for-profit basis, because in that case its purpose is not really to provide an education.
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Once the speculative demand ended, all of a sudden the added production facilities that had been brought into production by the high prices went out of production again, and there was a glut.
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Somehow most people believed they could get rich by going into debt to borrow assets that were going to rise in price. But you can’t get rich, ultimately, by going into debt. In the end the creditors always win.
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The essence of the global financial bubble is that savings are diverted to inflate the stock market, bond market and real estate prices rather than to build new factories and employ more labor.
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Trump’s junk economics is the illusion that if we cut the taxes on the wealthiest brackets, it’ll all trickle down. But it doesn’t trickle down.
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You have to abolish pension plans. You have to abolish social spending. You have to raise taxes.
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Europe is creating the flight of refugees that’s tearing it apart politically, and leading rightwing nationalist parties to gain power to withdraw from the Eurozone.
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You could say that the vote to withdraw from Europe is, it’s really a vote of the British middle class, the working class, to withdraw from the U.S. neoliberalism that has been running Europe for the last ten years.
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The only way people can repay the debt is by cutting their living standards very drastically. It means agreeing to shift their pension plans from defined benefit plans.
MICHAEL HUDSON