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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

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.
MICHAEL HUDSON

Good Loans Percent Salary Student
Inflation usually helps the economy at large, but not the 1% if wages rise. So the 1% says that it is terrible.
MICHAEL HUDSON

Economy Helping Wages
Somehow most people believed they could get rich by going into debt to borrow assets that were going to rise in price. But you can’t get rich, ultimately, by going into debt. In the end the creditors always win.
MICHAEL HUDSON

Country Debt People Some Somehow
Driving down the interest rates creates a boom in the stock market, and also the real estate market. The resulting capital gains not treated as income.
MICHAEL HUDSON

Driving Estate Income Rates Real
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
Small banks that lend to consumers are fine.
MICHAEL HUDSON

Banks Consumers Fine Small
The bankers are the people running these banks. They’re the chief officers, and they push the loans because they don’t care if they go bad. For one thing, they may package these bad loans and sell them off to gullible institutional investors.
MICHAEL HUDSON

Banker Loan Package Running Think
Nobody prefers to earn income any more, because that’s taxable. Rich people prefer to make capital gains.
MICHAEL HUDSON

Gains Income People
“We’ll help you get a better job. We’ll arrange a loan so that you don’t have to pay a penny for this education.” Their pet bank gets them the government-guaranteed loan, and the student may get the junk degree, but doesn’t get a job, so they don’t pay the loan.
MICHAEL HUDSON

Arrange Education Guaranteed Student
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
The seeming irony is that it’s so bad that it enables the Democratic Party to think, “A-ha, all we have to do is be the lesser evil.
MICHAEL HUDSON

Enable Evil Lesser
If the economy is growing, people want to employ more workers. If you hire more labor, wages go up.
MICHAEL HUDSON

Growing People Wages
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

Debt Economy Pay
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
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
New investment and employment fall off, and the economy is falls into a downward spiral.
MICHAEL HUDSON

Downward Economic Employment New Spiral

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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