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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.

Michael Hudson

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.
MICHAEL HUDSON

Country Debt People Some Somehow
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
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
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
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
What do the 5%, or the 1% actually use their money for? They lend it back to the economy at large, they load it down with debt. They make their money by lending to the bottom 95%, or the bottom 99%.
MICHAEL HUDSON

Giving Government Income
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
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
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
Wages for the ninety-nine percent have gone down, steadily, since 2008. They’ve gone down especially for the bottom twenty-five percent of the population.
MICHAEL HUDSON

Blue Mean Nine Ninety
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.
MICHAEL HUDSON

Homeowner Money Okay People Sheets
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
On the flat tax, the more you compress the tax rates, the more you untax where the income is really made, at the top of the pyramid.
MICHAEL HUDSON

Flat Income Pyramids Tax
Seventy-eight percent of millennials are worried about not having enough good paying job opportunity to pay off their student loans. Seventy-four percent can’t pay the health care if they get sick.
MICHAEL HUDSON

Eight Jobs Opportunity
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
When you say “bank,” a bank is a building, a set of computers and chairs and things.
MICHAEL HUDSON

Bankers People Running
Inflation usually helps the economy at large, but not the 1% if wages rise. So the 1% says that it is terrible.
MICHAEL HUDSON

Economy Helping Wages
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
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

Crisis Discipline Politician
Much higher cost for all the infrastructure that he’s proposing. You could call Trump’s plan “public investment to create private profit”. That’s really his plan in a summary.
MICHAEL HUDSON

Investment Plan Proposing Summary
The only way people can repay the debt is by cutting their living standards very drastically. It means agreeing to shift their pension plans from defined benefit plans.
MICHAEL HUDSON

Cutting Mean Pension Plan
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

Balance House People
The aim of promoting low down payments is to push prices back up so that fewer houses are going to be in negative equity and fewer people are going to walk away from the mortgages. That will save the from taking a loss on their junk mortgage loans.
MICHAEL HUDSON

House Loss Payments People Promoting
You could say that the vote to withdraw from Europe is, it’s really a vote of the British middle class, the working class, to withdraw from the U.S. neoliberalism that has been running Europe for the last ten years.
MICHAEL HUDSON

Middle Class Running Vote
This is the sector that backs the political campaigns of senators, presidents and congressmen, and they use this leverage to make sure that their people dominate the Federal Reserve, Treasury and the federal housing agencies.
MICHAEL HUDSON

Conbgression Make Sure Treasury
Europe is sort of like the Soviet Union in the ’30s and ’40s. There was an argument, is it reformable or not? There is a feeling, and I think it’s correct, that the European Union, the eurozone, and the euro, is not reformable, as a result of the Lisbon treaties and the other treaties that have created the euro.
MICHAEL HUDSON

Correct Feelings Reformable Taken Thinking
In order to be an economist these days, you have to participate in this fairytale that somehow we can recover and still make the banks rich. And it is a fairytale.
MICHAEL HUDSON

Fairytale Order Rich

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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Popular Authors

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.

Related Topics

Popular Authors

More Michael Hudson Quotes