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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

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
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.
MICHAEL HUDSON

Driving Estate Income Rates Real
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.
MICHAEL HUDSON

Bags Fund Leaving
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.
MICHAEL HUDSON

Country Pension People Rolling
Deflation is a leakage from this circular flow, to pay banks and the real estate, called the FIRE sector – finance, insurance and real estate. These transfer payments leave less and less of the paycheck to be spent on goods and services, so markets shrink.
MICHAEL HUDSON

Estate Fire Pay Real Train
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.
MICHAEL HUDSON

Income Investment Looks National Savings
Every government, from the Obama administration right through to Angela Merkel, the Eurozone and the IMF, promise to save the banks, not the economy.
MICHAEL HUDSON

Administration Government Promise
Europe is acting in a very self-destructive manner, but is doing so because it’s trying to be loyal to the United States.
MICHAEL HUDSON

Europe Self Trying
The one sure mark of a con, though, is the promise of free money.
MICHAEL HUDSON

Free Mark Money Promise
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
We’re still in the collapse that began after 2008. There’s not a new collapse, there hasn’t been a recovery.
MICHAEL HUDSON

Collapse Recovery Stills
In fact, there’s no way that banks can be paid everything that they’re owed.
MICHAEL HUDSON

Country Facts Paid People Person Way
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 HUDSON

Debt Economy Pay
If you have to pay about forty to forty-three percent of your income for housing, you also have to pay fifteen percent of your paycheck for the FICA for Social Security wage withholding.
MICHAEL HUDSON

Cards Income Three
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

Country Deflation Fall People
Textbooks don’t teach people how to avoid paying any income tax. But that’s what an army of tax lawyers and corporate tax accountants do.
MICHAEL HUDSON

Army Income People

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