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The price decline is a result of having to pay debts. That drains income from the circular flow between production and consumption – that is, between what people are paid when they go to work, and the things that they buy.

Michael Hudson

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
The problem is indeed that one party’s debt finds its counterpart in some other party’s savings. Not paying debts therefore involves annulling some other party’s financial claims on the debtor.
MICHAEL HUDSON

Annulling Counter Financial Problem
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.
MICHAEL HUDSON

Banker Loan Package Running Think
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.
MICHAEL HUDSON

Demand Ended Glut Once Production
I think we’re in the take-the-money-and-run stage of the economy. So the banks may go under, but the bankers, who make the policy, clean up.
MICHAEL HUDSON

Bankers Running Thinking
If the economy is growing, people want to employ more workers. If you hire more labor, wages go up.
MICHAEL HUDSON

Growing People Wages
You have to abolish pension plans. You have to abolish social spending. You have to raise taxes.
MICHAEL HUDSON

Pension Plans Simple Thinking
“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.
MICHAEL HUDSON

Arrange Education Guaranteed Student
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.
MICHAEL HUDSON

Fire Oil People Services Spend
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.
MICHAEL HUDSON

Good Loans Percent Salary Student
These $100 bills aren’t meant to circulate. They’re not to spend on goods and services. They’re a store of value. They’re a form of saving.
MICHAEL HUDSON

Circulate Saving Services Spending
Small banks that lend to consumers are fine.
MICHAEL HUDSON

Banks Consumers Fine Small
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 don’t think that governments should permit speculation in raw materials, because they’re what the economy basically needs.
MICHAEL HUDSON

Government Needs Thinking
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
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.
MICHAEL HUDSON

Cards Credit Fall Loan Mean People

The price decline is a result of having to pay debts. That drains income from the circular flow between production and consumption – that is, between what people are paid when they go to work, and the things that they buy.

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The price decline is a result of having to pay debts. That drains income from the circular flow between production and consumption – that is, between what people are paid when they go to work, and the things that they buy.

Related Topics

Popular Authors

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