More and more money is being extracted from of the production and consumption economy to pay the FIRE sector. That’s what causes debt deflation and shrinks markets. If you pay the banks, you have less to spend on goods and services.
MICHAEL HUDSONJunk economics denies the role of debt and denies the fact that the economic system we have now is dysfunctional.
More Michael Hudson Quotes
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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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To save the banks, you would have to turn the entire Eurozone into Greece.
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The Eurozone die is cast. Countries must withdraw from the euro so that governments can create their own money once again, and resist creditor demands to carve up and privatize their public domain.
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Nobody prefers to earn income any more, because that’s taxable. Rich people prefer to make capital gains.
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One of the big problems in America’s economic polarization and shrinkage is that pensions can’t be paid. So there are going to be defaults on pensions here, just like Europeans are insisting in rolling back pensions. You can look at Greece and Argentina as the future of America.
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Normally, if someone goes bankrupt, you wipe out the debt and get a fresh start. But that’s not permitted with student loans. So the effect is to impoverish many graduates with very high debts.
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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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Mr. Trump wants to turn the U.S. economy into the kind of real estate development that has made him so rich in New York.
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So we are in for years of debt deflation. That means that people have to pay so much debt service for mortgages, credit cards, student loans, bank loans and other obligations that they have less to spend on goods and services. So markets shrink.
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Seventy-eight percent of millennials are worried about not having enough good paying job opportunity to pay off their student loans. Seventy-four percent can’t pay the health care if they get sick.
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The United States and Europe are in a state of debt deflation, where people and businesses have to pay banks instead of spending their income on goods and services. So markets shrink, sales and profits fall, and the stock market turns down.
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If you look at payments to labor as a proportion of national income or gross domestic product, you find profits going way up, investment and savings going up.
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It thought that if it could subsidize banks lending homeowners enough money to buy houses from people who are defaulting, then the bank balance sheets would end up okay.
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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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There are two definitions of deflation. Most people think of it simply as prices going down. But debt deflation is what happens when people have to spend more and more of their income to carry the debts that they’ve run up – to pay their mortgage debt, to pay the credit card debt, to pay student loans.
MICHAEL HUDSON