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%.
I think the less fracking there is, the better it is for the economy and society.
I don't think that governments should permit speculation in raw materials, because they're what the economy basically needs.
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.
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.
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.
Most of these charges that people pay are economically unnecessary. There's no real cost behind them. There's no real value behind them. So, they're what the classical economist called empty pricing. Prices with no real cost value. What they called rent and fictitious capital. Capital claims on junk mortgage borrowers. The pretense is that all these debts can be paid but it's all fictitious, because everybody knows - at least on Wall Street everybody knows - that many debts can't be paid.
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.
Economic polarization is also occurring between creditor and debtor nations. This issplitting the eurozone between Germany, France and the Netherlands in the creditor camp, against Greece, Spain, Portugal, Ireland and Italy falling deeper into debt, unemployment and austerity - followed by emigration and capital flight.
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.
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.
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.
Inflation usually helps the economy at large, but not the 1% if wages rise. So the 1% says that it is terrible.
If the economy is growing, people want to employ more workers. If you hire more labor, wages go up.
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.
So the political choice today is much like the 1930s, when the global economy also broke down. The choice is between nationalism and populism on the right, or socialism reviving what used to be left-wing politics.
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.
The financial time frame always has been short-term. Projects with long-term paybacks are cut back, because CEOs and financial managers simply want to take their money and run. That is the financial mentality.
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.
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.
So, what people are actually left with to spend is maybe 25 to 30% of their income on goods and services, after paying taxes and after paying the FIRE sector (Finance, Insurance, Real Estate). Whether it's housing insurance or mortgage insurance. So there's an idea of distracting people. Don't think of your condition. Think of how the overall economy is doing. But don't think of the economy as an overall unit. Think of the stock market as the economy. Think of the rich people as the economy. Look at the yachts that are made. Somebody's living a lot better. Couldn't it be you?
You could say that the vote to withdraw from Europe is, it's really a vote of the British middle class, the working class, to withdraw from the U.S. neoliberalism that has been running Europe for the last ten years.
Seventy-eight percent of millennials are worried about not having enough good paying job opportunity to pay off their student loans. Seventy-four percent can't pay the health care if they get sick. Seventy-nine percent don't have enough money to live when they retire. So, already, we're having a whole generation that's coming on, not only here but also in Europe, that isn't able to get good-paying jobs.
If you have to pay about forty to forty-three percent of your income for housing, you also have to pay fifteen percent of your paycheck for the FICA for Social Security wage withholding. 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.
No price is too high to pay to try to make the financial system go on a little bit longer. But ultimately it can't be saved, because of the mathematics that are involved.
