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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

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.
MICHAEL HUDSON

Decade Economic Real Wall War
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
New investment and employment fall off, and the economy is falls into a downward spiral.
MICHAEL HUDSON

Downward Economic Employment New Spiral
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.
MICHAEL HUDSON

Country People Population Think
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.
MICHAEL HUDSON

Bond Employ Estate Market More Season
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

Estate Fire Pay Real Train
A bubble is only called that after it bursts, after the insiders get out, leaving the pension funds and small investors, Canadians and other naïve investors holding the bag.
MICHAEL HUDSON

Bags Fund Leaving
Then, all of a sudden, the Fed can raise interest rates, let the stock market prices collapse and the people will lose even more in the stock market than they would have by the negative interest rates in the bank. So it’s a pro-Wall Street financial engineering gimmick.
MICHAEL HUDSON

Collapse Gimmick Interest Negative Peopel
There are two definitions of deflation. Most people think of it simply as prices going down. But debt deflation is what happens when people have to spend more and more of their income to carry the debts that they’ve run up – to pay their mortgage debt, to pay the credit card debt, to pay student loans.
MICHAEL HUDSON

Running Thinking Two
Once the speculative demand ended, all of a sudden the added production facilities that had been brought into production by the high prices went out of production again, and there was a glut.
MICHAEL HUDSON

Demand Ended Glut Once Production
We’ve turned the post-war economy that made America prosperous and rich inside out.
MICHAEL HUDSON

People Rich Winning
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
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
To the deficit commission, a depression is the solution to the problem, not a problem.
MICHAEL HUDSON

Deficit Problem Solution
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.
MICHAEL HUDSON

Gains Income Real
Every government, from the Obama administration right through to Angela Merkel, the Eurozone and the IMF, promise to save the banks, not the economy.
MICHAEL HUDSON

Administration Government Promise

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.

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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.

Related Topics

Popular Authors

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