Michael Hudson Quotes & Sayings

Deflation means a slowdown of income growth. Markets shrink, new capital investment and employment also taper off, so wages decline. That is what's happening as deliberate policy in Europe and the United States. Falling or stagnant prices are simply the result of having less income to spend. — Michael Hudson

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

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

If you look at payments to labor as a proportion of national income or gross domestic product, you find profits going way up, investment and savings going up. — Michael Hudson

Almost all of the demand for oil that suddenly pushed prices up was speculative demand. People began to speculate not only in stocks and bonds and real estate, but also in commodities. The market went up for old tankers, which were used simply to store oil in. A lot of the oil was simply being stored for trading, not used. — Michael Hudson

I don't think that governments should permit speculation in raw materials, because they're what the economy basically needs. — Michael Hudson

The United States is pushing as policy division of the world into rival currency camps - the dollar area on the one hand, and the Russia-Chinese-Shanghai Cooperation Organization group on the other, especially now that the IMF has changed its rules. People think that if there are rival currency groupings and national currencies are going bust, we might as well use gold as a safe haven. — Michael Hudson

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

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

To set the stage for this discussion, it is necessary to explain that what is at work is an Orwellian strategy of rhetorical deception to represent finance and other rentier sectors as being part of the economy, not external to it. This is precisely the strategy that parasites in nature use to deceive their hosts that they are not free riders but part of the host's own body, deserving careful protection. — Michael Hudson

You have a choice. Either you can have more oil, or more clean water. Fracking is not good for the water supply. — Michael Hudson

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

That's the problem with the financial sector. Banks and the financial sector live in the short run, not the long run. In principle the government is supposed to make regulations that help the economy over time. But once it's taken over by the financial sector, the government lives in the short run too. — Michael Hudson

Education is something that should not be organized on a for-profit basis, because in that case its purpose is not really to provide an education. It's not to teach students how to get better work, but how to provide banks with a free giveaway opportunity from the government, by making junk loans that are defaulted on. The effect may be to wreck the futures of the graduates that fall for the false promises that are being made. — Michael Hudson

There are so many currency exchange rate problems that people are buying gold as a safe haven. Right now, gold looks like a safe haven if international exchange rates break down. — Michael Hudson

Nothing could be better for the economy than to get rid of fracking. — Michael Hudson

If you increase living standards you make labor more productive. This is why Asia today is becoming more productive than the United States. — Michael Hudson

Inflation usually helps the economy at large, but not the 1% if wages rise. So the 1% says that it is terrible. — Michael Hudson

More and more money is being extracted from of the production and consumption economy to pay the FIRE sector. That's what causes debt deflation and shrinks markets. If you pay the banks, you have less to spend on goods and services. — Michael Hudson

People are putting their money into treasuries because they worry that the risk of putting their money into the bond market, the stock market or even the money markets is very high. — Michael Hudson

One of the big problems in America's economic polarization and shrinkage is that pensions can't be paid. So there are going to be defaults on pensions here, just like Europeans are insisting in rolling back pensions. You can look at Greece and Argentina as the future of America. — Michael Hudson

The problems of 2008 were never cured. The Federal Reserve's solution to the crisis was to lend the economy enough money to borrow its way out of debt. 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

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

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

I think something like three-quarters of American currency is held abroad, by drug dealers, by tax evaders, Russians and Chinese. Other people think that they want to protect themselves against their own currency going down. When you have 75% of the currency and even more of the high-denomination $100 bills held abroad, you wonder whether these are people we really want to pay. If you get rid of the $100 bills, its foreign holders will be the main losers. — Michael Hudson

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

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

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

We go forward with our heads held high, but look back and remember where we come from. — Michael Hudson

What's bad for the frackers usually is good for the rest of the world. — Michael Hudson

The world's politics are in turmoil, not to mention the Mideast, where the US has mounted attacks from Libya to Iraq to Syria, and ISIS is attacking governments in today's pipeline rivalry. — Michael Hudson

Oil now, as a result of the Saudi production, is priced so low that there are not going to be new fracking investments made. A lot of companies that have gone into fracking are heavily debt-leveraged, and are beginning to default on their loans. The next wave of defaults that banks are talking about is probably going to be in the fracking industry. When the costs of production are so much more than they can end up getting for the oil, they just stop producing and stop paying their loans. — Michael Hudson

Debt deflation is when there's less money that people have to spend out of their paychecks on goods and services, because they're paying the FIRE sector. Oil going down is a function of the supply and demand of oil in the market. It's a separate phenomenon. — Michael Hudson

Just like a house is worth whatever a bank's going to lend against it, an education is worth whatever the bank is going to lend the student to pay the university. So the availability of government-guaranteed student loans has vastly inflated the cost of education, just like it's inflated the cost of housing. — Michael Hudson

Throughout history, the only way of restoring stability is to write down the debts. That is treated now as if it's something that can't be done. But it's the only thing that's going to revive the economy. — Michael Hudson

Most of the European leaders look at themselves as having to follow the United States, because if the US opposes them, there will be a regime change. — Michael Hudson

Look at Ukraine. Its currency, the hernia, is plunging. The euro is really in a problem. Greece is problematic as to whether it can pay the IMF, which is threatening not to be part of the troika with the European Central Bank and the European Union making more loans to enable Greece to pay the bondholders and the banks. Britain is having a referendum as to whether to withdraw from the European Union, and it looks more and more like it may do so. So the world's politics are in turmoil. — Michael Hudson

When people are running up more and more debt for housing, they call that "real wealth." It exposes what's wrong in the mainstream economics and why most of the economics that justifies austerity programs and economic shrinkage is in the textbooks is not scientific. Junk economics denies the role of debt and denies the fact that the economic system we have now is dysfunctional. — Michael Hudson

Actually, high housing prices don't help the economy. They raise the cost of living. — Michael Hudson

The fact that you have government-guaranteed student loans has created a whole new sector in the American economy that didn't really exist before - private for-profit universities that sell junk degrees that don't help the students. They promise the students, "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

The effect of metals speculation was to push up the prices that China had to pay to countries like Australia. This squeezed China. 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

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

When you say "bank," a bank is a building, a set of computers and chairs and things. 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

So the Bush-Obama administration has taken a fiscal stance diametrically opposed to that of the patron saint of free enterprise. 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. By shifting the tax burden off property and off rent-seeking monopolies - above all, off the financial sector - this policy has raised America's cost of living and doing business, thereby undercutting its competitive power and running up larger and larger foreign debt. — Michael Hudson

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

The economy is being run primarily by the banks for their own interest. — Michael Hudson

High prices can be the result of speculation, and maybe plunging prices can be attributed to the end of speculation, but low prices over time aren't caused by speculation. That's oversupply, mainly by Saudi Arabia flooding the market with low-priced oil to discourage rival oil producers, whether it's Russian oil or American fracking. — Michael Hudson

I think the less fracking there is, the better it is for the economy and society. — 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. — Michael Hudson

When they say inflation is bad, deflation is good, what they mean is, more money for us 1% is good; we're all for asset price inflation, we're all for housing prices going up, and we're all for our stock and bonds prices going up. We're just against you workers getting more income. — Michael Hudson

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

People tend to think that paying a debt is like going out and buying a car, buying more food or buying more clothes. But it really isn't. When you pay a debt to the bank, the banks use this money to lend out to somebody else or to yourself. The interest charges to carry this debt go up and up as debt grows. — Michael Hudson

Europe is creating the flight of refugees that's tearing it apart politically, and leading rightwing nationalist parties to gain power to withdraw from the Eurozone. — Michael Hudson

I think we're in the take-the-money-and-run stage of the economy. So the banks may go under, but the bankers, who make the policy, clean up. — Michael Hudson

You're having government spending on the economy being cut almost everywhere. That means that the only source of spending for growth has to come from borrowing from the banking system. — Michael Hudson

Paying debt service to banks leaves less income to buy goods and services. — Michael Hudson

The one sure mark of a con, though, is the promise of free money. — Michael Hudson

Everybody would be better off if they could buy housing for only, let's say, a carrying charge of one-quarter of their income. That used to be the case 50 years ago. Buyers had to save up and make a higher down payment, giving them more equity - perhaps 25 or 30 percent. But today, banks are creating enough credit to bid up housing prices again. — Michael Hudson

It's amazing that Europe says, "What are we going to do with these refugees?" It's as if it doesn't realize that being part of NATO and bombing these countries forces them to choose to live by fleeing, or to stay and get bombed. — Michael Hudson

The most serious problems lie in the financial sphere, where the economy's debt overhead has grown more rapidly than the 'real' economy's ability to carry this debt ... 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

Stocks always go down much faster than they go up. That's why it's called a crash. People who put their money into the stocks will find, all of a sudden, that stock prices are no longer being supported by the debt leveraging that's been holding them up. — Michael Hudson

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

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,. So to the extent that companies use financial engineering rather than industrial engineering to increase the price of their stock you're going to have a bubble. But it's not considered a bubble, because the government is behind it, and it hasn't burst yet. — Michael Hudson

In housing you have jingle mail and you can walk away and leave the bank holding the bag. In the case of student loans, the debt follows you through life, and the banks or government will turn it over to collection agencies that are not very nice people and can do all sorts of harassing things to you. It's becoming a nightmare. — Michael Hudson

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

Today, people are having to spend so much of their money, to acquire a house and to get an education that they don't have enough to spend on goods and services, except by running into yet more debt on their credit cards and other borrowings. — Michael Hudson

To the deficit commission, a depression is the solution to the problem, not a problem. — 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

If the economy is growing, people want to employ more workers. If you hire more labor, wages go up. — Michael Hudson

The myth is that if housing prices go up, Americans will be richer. What banks - and behind them, the Federal Reserve - really want is for new buyers to be able to borrow enough money to buy the houses from mortgage defaulters, and thus save the banks from suffering from more mortgage defaults. — Michael Hudson

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

If a lot of money goes into the stock market, it'll push up prices, making money for stock speculators. Then the insiders can decide that it's time to sell out, and the market will plunge. — Michael Hudson

The bank's product is debt, because the banks want to make sure that they can get paid for the debt. But ultimately the only party that can pay the debt is the government, because it runs the printing presses. So the debts ultimately either are paid by the government, or they're paid by a huge transfer of property from debtors to creditors - or, the debts are written off. — Michael Hudson

Europe is acting in a very self-destructive manner, but is doing so because it's trying to be loyal to the United States. — Michael Hudson

The underlying strategy of the Fed is to tell people, "Do you want your money to lose value in the bank, or do you want to put it in the stock market?" They're trying to push money into the stock market, into hedge funds, to temporarily bid up prices. 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

The natural geopolitical arrangement is for Europe to be part of Eurasia, especially for Germany to develop trade and investment relationships with Russia. — Michael Hudson

US opposition to Russia and China has entailed sanctions against Russia, and Russia in turn has made counter-sanctions against Europe. So Europe is essentially sacrificing its opportunities for trade and investment in order to remain part of NATO. It is also agreeing to bomb Syria and the Near East, creating a wave of refugees that it doesn't know what to do with. — Michael Hudson

Most people think of the economy as producing goods and services and paying labor to buy what it produces. But a growing part of the economy in every country has been the Finance, Insurance and Real Estate (FIRE) sector, which comprises the rent and interest paid to the economy's balance sheet of assets by debtors and rent payers. — Michael Hudson

When I say the economy is shrinking, it's the economy of the 99%, the people who have to work for a living and depend on earning money for what they can spend. The 1% makes its money basically by lending out their money to the 99%, on charging interest and speculating. So the stock market's doubled, the bond market's gone way up, and the 1% are earning more money than ever before, but the 99% are not. They're having to pay the 1%. — Michael Hudson