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New investment and employment fall off, and the economy is falls into a downward spiral.

Michael Hudson

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.
MICHAEL HUDSON

House Suffering Want
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.
MICHAEL HUDSON

Bond Employ Estate Market More Season
Junk economics denies the role of debt and denies the fact that the economic system we have now is dysfunctional.
MICHAEL HUDSON

Economic Fact Junk System
You have to have at least fifty percent of the European population emigrate, either to Russia or China. You would have to have mass starvation. Very simple. That’s the price that the Eurozone thinks is well worth paying.
MICHAEL HUDSON

Country People Population Think
I don’t think that governments should permit speculation in raw materials, because they’re what the economy basically needs.
MICHAEL HUDSON

Government Needs Thinking
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.
MICHAEL HUDSON

Collapse Gimmick Interest Negative Peopel
In fact, there’s no way that banks can be paid everything that they’re owed.
MICHAEL HUDSON

Country Facts Paid People Person Way
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.
MICHAEL HUDSON

Country Fleeing People Person
Paying debt service to banks leaves less income to buy goods and services.
MICHAEL HUDSON

Debts Goods Income Paying Services
This is not really currency that circulates. It’s like the old joke about expensive vintage wine. Wine prices will go up and once in a while somebody will buy a 50-year-old bottle of wine and say, “Wait a minute. This has gone bad.” The answer is, “Well, that wine isn’t for drinking; that’s for trading.”
MICHAEL HUDSON

Circulate Drinking Like Somebody Wine Years
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 HUDSON

Accounting Balance Bookkeeping Party Speak
If the economy is growing, people want to employ more workers. If you hire more labor, wages go up.
MICHAEL HUDSON

Growing People Wages
Nobody prefers to earn income any more, because that’s taxable. Rich people prefer to make capital gains.
MICHAEL HUDSON

Gains Income People
People are putting their money into treasuries because they worry that the risk of putting their money into the bond market, the stock market or even the money markets is very high.
MICHAEL HUDSON

People Risk Worry
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
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

New investment and employment fall off, and the economy is falls into a downward spiral.

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New investment and employment fall off, and the economy is falls into a downward spiral.

Related Topics

Popular Authors

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