Paying debt service to banks leaves less income to buy goods and services.
MICHAEL HUDSONWhat 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%.
More Michael Hudson Quotes
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New investment and employment fall off, and the economy is falls into a downward spiral.
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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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Economists often define their discipline as “the allocation of scarce resources among competing ends.” But when resources or money really become scarce, economists call it a crisis and say that it’s a question for politicians, not their own department.
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Junk economics denies the role of debt and denies the fact that the economic system we have now is dysfunctional.
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To save the banks, you would have to turn the entire Eurozone into Greece.
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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.
MICHAEL HUDSON -
America needs an ineffective president. That’s much better than an effective president that’s going to go to war with Russia, that’s going to push for the Trans-Pacific Partnership, that’s going to protect Wall Street, and that’s going to oppose neoliberal austerity.
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The United States Government has fought against creation of an international court to adjudicate the ability of national economies to pay debts.
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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.
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When economists speak of money, they neglect that all money and credit is debt. That is the essence of bookkeeping and accounting. There are always two sides to the balance sheet. And one party’s money or savings is another party
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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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When we say “people worry” about inflation, it’s mainly bondholders that worry. The labor force benefitted from the inflation of the ’50s, ’60s and ’70s.
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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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You have to pay medical care, you have to pay the banks for your credit card debt, student loans. Then you only have about twenty-five or thirty-five percent, maybe one-third of your salary to buy goods and services. That’s all.
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When you say “paying the banks,” what they really mean is paying the bank bondholders. They are basically the One Percent.
MICHAEL HUDSON