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 HudsonDeflation 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 HudsonWages for the ninety-nine percent have gone down, steadily, since 2008. They've gone down especially for the bottom twenty-five percent of the population. This means that they've gone down especially for Blacks and Hispanics and other blue-collar workers. Their net worth has actually turned negative, and they don't have enough money to get by.
Michael HudsonStocks 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 HudsonMost 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 HudsonIn real estate you can avoid ever having to pay a capital gains tax, decade after decade, century after century. When you sell a property and make a capital gain, you simply turn around and buy a new property. The gain is not taxed. It's called "preserving your capital investment" - which goes up and up in value with each transaction.
Michael Hudson