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 HUDSONThe 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.
More Michael Hudson Quotes
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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.
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New investment and employment fall off, and the economy is falls into a downward spiral.
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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.
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Textbooks don’t teach people how to avoid paying any income tax. But that’s what an army of tax lawyers and corporate tax accountants do.
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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.
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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.
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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,.
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The one sure mark of a con, though, is the promise of free money.
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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.
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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.
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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.
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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.
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The parasite can’t simply come in and take something. First of all, it needs to numb the host. It has an enzyme so that the host doesn’t realize the parasite’s there.
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One basic myth is that rich people get wealthy by earning income. But that’s not how most get rich. Most of the gains of the rich people since 1945 have been “capital gains”.
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I guess the main thing that came out of the Panama Papers was that Ukrainian President Poroshenko had promised to divest of his chocolate company and instead, he simply moved it into an offshore account.
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That’s the “magic” of double-taxation treaties: you can shop around for the lowest taxer.
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What’s the best gamble in the world, right now? Its betting that Deutsche Bank stock is going to go down. Short sellers borrowed money from their banks to place bets that Deutsche Bank stock is going to go down.
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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.
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Either you can save the economy, or you can save the One Percent from losing a single penny.
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Elites play the role today that landlords played under feudalism. They levy interest and financial fees that are like a tax, to support what the classical economists called “unproductive activity.”
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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.”
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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.
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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 -
Inflation usually helps the economy at large, but not the 1% if wages rise. So the 1% says that it is terrible.
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To the deficit commission, a depression is the solution to the problem, not a problem.
MICHAEL HUDSON -
The financial time frame always has been short-term. Projects with long-term paybacks are cut back, because CEOs and financial managers simply want to take their money and run. That is the financial mentality.
MICHAEL HUDSON