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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.

Michael Hudson

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.”
MICHAEL HUDSON

Circulate Drinking Like Somebody Wine Years
While escalating war in Afghanistan and maintaining over 850 military bases around the world, the administration has run up the national debt that Smith decried.
MICHAEL HUDSON

Around Country Decorated Escalating Maintain
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

Conbgression Make Sure Treasury
The companies aren’t hiring, because consumers don’t have enough money to buy the goods and services.
MICHAEL HUDSON

Consumers Enough Hiring Services
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

Debt Deflation Fire Pay
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.
MICHAEL HUDSON

Debt Economy Pay
Either you can save the economy, or you can save the One Percent from losing a single penny.
MICHAEL HUDSON

Economy Losing Pennies
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.
MICHAEL HUDSON

Make Over Parasite Something Take
The reason is that every recovery since 1945 has begun with a higher, and higher level of debt. The debt is so high now, that since 2008 we’ve been in what I call, debt deflation.
MICHAEL HUDSON

Debt Deflation Higher Reason
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 HUDSON

Bank Cheaper Cushion House Risky
To save the banks, you would have to turn the entire Eurozone into Greece.
MICHAEL HUDSON

Country Eurozone Greece People Turns
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”.
MICHAEL HUDSON

Earning Income People
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
These $100 bills aren’t meant to circulate. They’re not to spend on goods and services. They’re a store of value. They’re a form of saving.
MICHAEL HUDSON

Circulate Saving Services Spending
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.
MICHAEL HUDSON

Army Income People
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

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.

Related Topics

Popular Authors

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.

Related Topics

Popular Authors

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