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.
MICHAEL HUDSONMore 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.
More Michael Hudson Quotes
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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.
MICHAEL HUDSON -
Paying debt service to banks leaves less income to buy goods and services.
MICHAEL HUDSON -
When you say “paying the banks,” what they really mean is paying the bank bondholders. They are basically the One Percent.
MICHAEL HUDSON -
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 -
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 -
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 -
We’re still in the collapse that began after 2008. There’s not a new collapse, there hasn’t been a recovery.
MICHAEL HUDSON -
If bankers can push the loans and make more profits for the bank, they get paid higher bonuses. They often also get stock options.
MICHAEL HUDSON -
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 -
New investment and employment fall off, and the economy is falls into a downward spiral.
MICHAEL HUDSON -
Money is not a factor of production. But in order to have access to credit, in order to get money, in order to get an education, you have to pay the banks.
MICHAEL HUDSON -
If the economy is growing, people want to employ more workers. If you hire more labor, wages go up.
MICHAEL HUDSON -
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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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.
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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.
MICHAEL HUDSON