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 HUDSONThe United States Government has fought against creation of an international court to adjudicate the ability of national economies to pay debts.
More Michael Hudson Quotes
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The one sure mark of a con, though, is the promise of free money.
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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.
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Once the speculative demand ended, all of a sudden the added production facilities that had been brought into production by the high prices went out of production again, and there was a glut.
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Nobody prefers to earn income any more, because that’s taxable. Rich people prefer to make capital gains.
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To the deficit commission, a depression is the solution to the problem, not a problem.
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If you have to pay about forty to forty-three percent of your income for housing, you also have to pay fifteen percent of your paycheck for the FICA for Social Security wage withholding.
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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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You have to abolish pension plans. You have to abolish social spending. You have to raise taxes.
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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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To save the banks, you would have to turn the entire Eurozone into Greece.
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People are putting their money into treasuries because they worry that the risk of putting their money into the bond market, the stock market or even the money markets is very high.
MICHAEL HUDSON -
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.
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I don’t think that governments should permit speculation in raw materials, because they’re what the economy basically needs.
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Paying debt service to banks leaves less income to buy goods and services.
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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.
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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 -
“We’ll help you get a better job. We’ll arrange a loan so that you don’t have to pay a penny for this education.” Their pet bank gets them the government-guaranteed loan, and the student may get the junk degree, but doesn’t get a job, so they don’t pay the loan.
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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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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 -
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 -
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 HUDSON -
There are so many currency exchange rate problems that people are buying gold as a safe haven. Right now, gold looks like a safe haven if international exchange rates break down.
MICHAEL HUDSON -
You get a constituency; you make them believe your promises, and then you turn them over to your financial campaign backers. That’s what politics has become and that’s as much an art of deception as economics is.
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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 -
There are two definitions of deflation. Most people think of it simply as prices going down. But debt deflation is what happens when people have to spend more and more of their income to carry the debts that they’ve run up – to pay their mortgage debt, to pay the credit card debt, to pay student loans.
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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