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

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.

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.

One basic myth is that rich people get wealthy by earning income. But that's not how most get rich. Most of the gains of the rich people since 1945 have been "capital gains".

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.

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.

What do the 5%, or the 1% actually use their money for? They lend it back to the economy at large, they load it down with debt. They make their money by lending to the bottom 95%, or the bottom 99%. When you give them more after-tax income, it enables them to buy even more control of government, even more control of election campaigns. They're not going to spend this money back into the goods-and-services economy.