If bankers can push the loans and make more profits for the bank, they get paid higher bonuses. They often also get stock options.
MICHAEL HUDSONWhat’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.
More Michael Hudson Quotes
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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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You have to abolish pension plans. You have to abolish social spending. You have to raise taxes.
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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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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%.
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If you’re a wealthy heir with a trust fund, and you sell stocks, make your 10% gains since Donald Trump, and then you buy other stocks, you can avoid paying taxes. And if your accountant registers your wealth offshore in a Panamanian fund, like Russian kleptocrats do – and as more and more Americans do.
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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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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.
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Most of these charges that people pay are economically unnecessary. There’s no real cost behind them. There’s no real value behind them. So, they’re what the classical economist called empty pricing. Prices with no real cost value.
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One of the big problems in America’s economic polarization and shrinkage is that pensions can’t be paid. So there are going to be defaults on pensions here, just like Europeans are insisting in rolling back pensions. You can look at Greece and Argentina as the future of America.
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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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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.
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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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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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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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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