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.
MICHAEL HUDSONIf 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.
More Michael Hudson Quotes
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People think of a parasite as simply taking money, taking blood out of a host or taking money out of the economy. But in nature it’s much more complicated.
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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.
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Today, people are having to spend so much of their money, to acquire a house and to get an education that they don’t have enough to spend on goods and services, except by running into yet more debt on their credit cards and other borrowings.
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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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The economy is being run primarily by the banks for their own interest.
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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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The aim of promoting low down payments is to push prices back up so that fewer houses are going to be in negative equity and fewer people are going to walk away from the mortgages. That will save the from taking a loss on their junk mortgage loans.
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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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In order to be an economist these days, you have to participate in this fairytale that somehow we can recover and still make the banks rich. And it is a fairytale.
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And then the parasites have another enzyme that takes over the host’s brain. It makes the host imagine that the parasite is part of its own body, actually part of itself and hence to be protected. That’s basically what Wall Street has done.
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I guess the main thing that came out of the Panama Papers was that Ukrainian President Poroshenko had promised to divest of his chocolate company and instead, he simply moved it into an offshore account.
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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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If the bank goes under, they get to keep all of these salaries and options – and the government will bail out the bank. These guys will take their money and run, which is pretty much what they’re doing now.
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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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I don’t think that governments should permit speculation in raw materials, because they’re what the economy basically needs.
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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.
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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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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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Small banks that lend to consumers are fine.
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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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You have to have at least fifty percent of the European population emigrate, either to Russia or China. You would have to have mass starvation. Very simple. That’s the price that the Eurozone thinks is well worth paying.
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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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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.
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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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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.
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So we are in for years of debt deflation. That means that people have to pay so much debt service for mortgages, credit cards, student loans, bank loans and other obligations that they have less to spend on goods and services. So markets shrink.
MICHAEL HUDSON