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 HUDSONMathematically, 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.
More Michael Hudson Quotes
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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 -
New investment and employment fall off, and the economy is falls into a downward spiral.
MICHAEL HUDSON -
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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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 -
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.
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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 -
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 -
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.
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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 -
We’ve turned the post-war economy that made America prosperous and rich inside out.
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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 -
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.
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To the deficit commission, a depression is the solution to the problem, not a problem.
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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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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