Michael Hudson Professions : Professor Born : 1939 Browse All Authors Top 169 quotes by Michael Hudson This is not really currency that circulates. It's like the old joke about expensive vintage wine. Wine prices will go up and once in a while somebody will buy a 50-year-old bottle of wine and say, "Wait a minute. This has gone bad." The answer is, "Well, that wine isn't for drinking; that's for trading." These $100 bills aren't meant to circulate. They're not to spend on goods and services. They're a store of value. They're a form of saving. Michael Hudson wine drinking years If bankers can push the loans and make more profits for the bank, they get paid higher bonuses. They often also get stock options. 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. Michael Hudson guy government running The real estate interests and banks are in a kind of symbiosis. They're the largest-growing part of the economy. 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. Michael Hudson agency real people 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. I think I'm just going to move out and buy a cheaper house." So it's very risky when you have only a 3% or 3.5% equity for the loan. The bank really isn't left with much cushion as collateral. Michael Hudson mean moving thinking 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. Michael Hudson debt income people 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 real fire pay When Hillary Clinton said she's going to do just what Obama does and we're going to continue to recover, most people know that we're not recovering at all. We're shrinking. Michael Hudson shrinking doe people As you have to pay more interest and amortization on what you owe, you're left with less and less money to buy goods and services - unless you borrow even more and go further into debt. Michael Hudson debt interest pay Basically, unless you're willing to write down debts and save the economy, you're going to have deflation and a steady drain in purchasing power - that is, shrinking markets. Michael Hudson shrinking debt writing Paying debt service to banks leaves less income to buy goods and services. Michael Hudson paying-debts goods-and-services income 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. Michael Hudson labor-force worry people 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 wages helping If the economy is growing, people want to employ more workers. If you hire more labor, wages go up. Michael Hudson growing wages people When there's deflation, it means that although most markets are shrinking and people have less to spend, the 1% that hold the 99% in debt are getting all the growth in wealth and income. Deflation means that income is being transferred to the 1%, that is, to the creditors and property owners. Michael Hudson growth mean people For many people, the mortgages they took out before 2008 are so high that they would be better off walking away from their houses. That is called "jingle mail," returning the keys to the bank and saying, "You can have the house. I can buy the house next door that's just like this for 20% less, so I'm going to save money and switch." That's what someone like Donald Trump or a real estate investor would do. But the banks are trying to convince the mortgage debtors, the homeowners, not to act in their own self-interest. Michael Hudson walking-away keys real Actually, high housing prices don't help the economy. They raise the cost of living. Michael Hudson cost-of-living economy helping 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. Michael Hudson house loss people The vast majority of $100 bills are abroad, not in the United States. So yes, of course there's a use here but nowhere near as much as there's a use for $100 bills abroad. Michael Hudson majority united-states use In China the largest denomination bill they have is 100 yen, and that's maybe $7. So here you have a whole economy working with only a $7 note as the largest denomination. The euro wants to get rid of the 500-euro bill just as the United States years ago got rid of the $1,000 bill because only the criminals used $1,000 bills. Michael Hudson criminals united-states years There really isn't a recovery, and no signs of it on the horizon, because people have to pay the banks. It's a vicious circle - or rather, a downward spiral. Michael Hudson recovery circles people Similar Authors Bryan Stevenson professor Bruce Greenwald professor Bruce Ames professor Brian Wansink professor Brian Schmidt professor Brian Martin professor All Authors