When you say “bank,” a bank is a building, a set of computers and chairs and things.
MICHAEL HUDSONDeflation 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.
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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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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If the economy is growing, people want to employ more workers. If you hire more labor, wages go up.
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Since 2008 you’ve had the largest bond market rally in history, as the Federal Reserve flooded the economy with quantitative easing to drive down interest rates.
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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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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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We’ve turned the post-war economy that made America prosperous and rich inside out.
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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.
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The United States and Europe are in a state of debt deflation, where people and businesses have to pay banks instead of spending their income on goods and services. So markets shrink, sales and profits fall, and the stock market turns down.
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When I say the economy is shrinking, it’s the economy of the 99%, the people who have to work for a living and depend on earning money for what they can spend.
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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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Britain is having a referendum as to whether to withdraw from the European Union, and it looks more and more like it may do so. So the world’s politics are in turmoil.
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That’s the “magic” of double-taxation treaties: you can shop around for the lowest taxer.
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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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Russia was under the impression that the neoliberal advisors were going to make Russia as rich as the United States. What they really did was create a kleptocracy that was virtually tax-free.
MICHAEL HUDSON