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Now, suppose that a homeowner puts down only 3% of their own money or 3.5% for the FHA. That means if prices go down by only 3%, the house will be in negative equity and it would pay the homeowner just to walk away and say, “The house now is worth less than the mortgage I owe.

Michael Hudson

When we say “people worry” about inflation, it’s mainly bondholders that worry. The labor force benefitted from the inflation of the ’50s, ’60s and ’70s.
MICHAEL HUDSON

Force Labor People Worry
We’ve turned the post-war economy that made America prosperous and rich inside out.
MICHAEL HUDSON

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

Gains Income People
Mr. Trump wants to turn the U.S. economy into the kind of real estate development that has made him so rich in New York.
MICHAEL HUDSON

Kind People Real
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
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
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 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
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
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

Debt Income People
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
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
You have to abolish pension plans. You have to abolish social spending. You have to raise taxes.
MICHAEL HUDSON

Pension Plans Simple Thinking
The United States Government has fought against creation of an international court to adjudicate the ability of national economies to pay debts.
MICHAEL HUDSON

Ability Creation Economy
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

Factor Get Money Order
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
Trump’s junk economics is the illusion that if we cut the taxes on the wealthiest brackets, it’ll all trickle down. But it doesn’t trickle down.
MICHAEL HUDSON

Cutting Illusion Junk
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
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

Mainstream People Real Running
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 other dynamic keeping the stock market up – both for technology stocks and others – is that companies are using a lot of their income for stock buybacks and to pay out higher dividends, not make new investment,.
MICHAEL HUDSON

Engineering Government Technology
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
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
People think of a parasite as simply taking money, taking blood out of a host or taking money out of the economy. But in nature it’s much more complicated.
MICHAEL HUDSON

People Thinking Wall

Now, suppose that a homeowner puts down only 3% of their own money or 3.5% for the FHA. That means if prices go down by only 3%, the house will be in negative equity and it would pay the homeowner just to walk away and say, “The house now is worth less than the mortgage I owe.

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Now, suppose that a homeowner puts down only 3% of their own money or 3.5% for the FHA. That means if prices go down by only 3%, the house will be in negative equity and it would pay the homeowner just to walk away and say, “The house now is worth less than the mortgage I owe.

Related Topics

Popular Authors

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