Mathematically, debts grow exponentially at compound interest. Banks recycle the interest into new loans, so debts grow exponentially, faster than the economy can afford to pay.
MICHAEL HUDSONSmall banks that lend to consumers are fine.
More Michael Hudson Quotes
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We’ve turned the post-war economy that made America prosperous and rich inside out.
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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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People think of a parasite as simply taking money, taking blood out of a host or taking money out of the economy. But in nature it’s much more complicated.
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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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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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Most people think of the economy as producing goods and services and paying labor to buy what it produces.
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The seeming irony is that it’s so bad that it enables the Democratic Party to think, “A-ha, all we have to do is be the lesser evil.
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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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It’s amazing that Europe says, “What are we going to do with these refugees?” It’s as if it doesn’t realize that being part of NATO and bombing these countries forces them to choose to live by fleeing, or to stay and get bombed.
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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.
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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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The United States Government has fought against creation of an international court to adjudicate the ability of national economies to pay debts.
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Economists often define their discipline as “the allocation of scarce resources among competing ends.” But when resources or money really become scarce, economists call it a crisis and say that it’s a question for politicians, not their own department.
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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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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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You get a constituency; you make them believe your promises, and then you turn them over to your financial campaign backers. That’s what politics has become and that’s as much an art of deception as economics is.
MICHAEL HUDSON -
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.
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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 -
America needs an ineffective president. That’s much better than an effective president that’s going to go to war with Russia, that’s going to push for the Trans-Pacific Partnership, that’s going to protect Wall Street, and that’s going to oppose neoliberal austerity.
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When people are running up more and more debt for housing, they call that “real wealth.” It exposes what’s wrong in the mainstream economics and why most of the economics that justifies austerity programs and economic shrinkage is in the textbooks is not scientific.
MICHAEL HUDSON -
Most of these charges that people pay are economically unnecessary. There’s no real cost behind them. There’s no real value behind them. So, they’re what the classical economist called empty pricing. Prices with no real cost value.
MICHAEL HUDSON -
The bankers are the people running these banks. They’re the chief officers, and they push the loans because they don’t care if they go bad. For one thing, they may package these bad loans and sell them off to gullible institutional investors.
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“We’ll help you get a better job. We’ll arrange a loan so that you don’t have to pay a penny for this education.” Their pet bank gets them the government-guaranteed loan, and the student may get the junk degree, but doesn’t get a job, so they don’t pay the loan.
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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.
MICHAEL HUDSON -
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
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New investment and employment fall off, and the economy is falls into a downward spiral.
MICHAEL HUDSON