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Most people think of the economy as producing goods and services and paying labor to buy what it produces.

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

Debt Deflation Fire Pay
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 HUDSON

Mean Mortgage Moving Thinking
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
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.
MICHAEL HUDSON

Factor Get Money Order
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.
MICHAEL HUDSON

Homeowner Money Okay People Sheets
We’ve turned the post-war economy that made America prosperous and rich inside out.
MICHAEL HUDSON

People Rich Winning
The only way people can repay the debt is by cutting their living standards very drastically. It means agreeing to shift their pension plans from defined benefit plans.
MICHAEL HUDSON

Cutting Mean Pension Plan
The one sure mark of a con, though, is the promise of free money.
MICHAEL HUDSON

Free Mark Money Promise
If the economy is growing, people want to employ more workers. If you hire more labor, wages go up.
MICHAEL HUDSON

Growing People Wages
That’s the “magic” of double-taxation treaties: you can shop around for the lowest taxer.
MICHAEL HUDSON

Magic Taxation Treaties
I think we’re in the take-the-money-and-run stage of the economy. So the banks may go under, but the bankers, who make the policy, clean up.
MICHAEL HUDSON

Bankers Running Thinking
Europe is acting in a very self-destructive manner, but is doing so because it’s trying to be loyal to the United States.
MICHAEL HUDSON

Europe Self Trying
This means that they’ve gone down especially for Blacks and Hispanics and other blue-collar workers. Their net worth has actually turned negative, and they don’t have enough money to get by.
MICHAEL HUDSON

Blue Collar Enough Mean Money Negative
The problem is indeed that one party’s debt finds its counterpart in some other party’s savings. Not paying debts therefore involves annulling some other party’s financial claims on the debtor.
MICHAEL HUDSON

Annulling Counter Financial Problem
Either you can save the economy, or you can save the One Percent from losing a single penny.
MICHAEL HUDSON

Economy Losing Pennies
Normally, if someone goes bankrupt, you wipe out the debt and get a fresh start. But that’s not permitted with student loans. So the effect is to impoverish many graduates with very high debts.
MICHAEL HUDSON

Debt Fresh Start Wipe

Most people think of the economy as producing goods and services and paying labor to buy what it produces.

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Most people think of the economy as producing goods and services and paying labor to buy what it produces.

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