If you increase living standards, you make labor more productive. This is why Asia today is becoming more productive than the United States.
Michael HudsonEverybody 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 HudsonThere 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 HudsonAs 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 HudsonPeople think of a business cycle, which is a boom followed by a recession and then automatic stabilizers revive the economy. But this time we can't revive. The reason is that every recovery since 1945 has begun with a higher, and higher level of debt. The debt is so high now, that since 2008 we've been in what I call, debt deflation.
Michael HudsonYou have to abolish pension plans. You have to abolish social spending. You have to raise taxes. You have to have at least fifty percent of the European population emigrate, either to Russia or China. You would have to have mass starvation. Very simple. That's the price that the Eurozone thinks is well worth paying.
Michael Hudson