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 HUDSONDebt 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.
More Michael Hudson Quotes
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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.
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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.
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.
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If the economy is growing, people want to employ more workers. If you hire more labor, wages go up.
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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.
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you’ll load the company you take over with debt. But you don’t have to pay taxes on the profits that you pay out in this way. You can deduct the interest from your tax liability.
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If the bank goes under, they get to keep all of these salaries and options – and the government will bail out the bank. These guys will take their money and run, which is pretty much what they’re doing now.
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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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It will make his fellow developers rich, and it will make the banks that finance this infrastructure rich, but the people are going to have to pay for it in a much higher cost for transportation.
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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 -
Paying debt service to banks leaves less income to buy goods and services.
MICHAEL HUDSON -
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.
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The economy is being run primarily by the banks for their own interest.
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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.
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The ideological foundation of today’s business schools is that economic control should be shifted out of government hands into those of financial managers – that is, Wall Street.
MICHAEL HUDSON