Michael Hudson on Results From The Cares Act

ByShaun Snapp

Executive Summary

  • The US Treasury creates money through issuing debt — or a government bond, not through directly issuing money itself.

Introduction

The outcome is explained in the following quotation.

“Well, here’s what happened. The Cares Act with President Trump gave everybody 1200 dollars. The 1200 dollars for most people was paid into their bank account or their credit card account. So what happened? More than half of the Cares money was spent on paying down the debts of companies and the banks. It wasn’t spent on goods and services. People got a credit in the bank account, with the bank immediately using that for writing down the debt. So, what did by giving 1200 dollars to everybody was to defer their falling further behind in their credit card account, further behind in their bank account and overdraft, and you enabled them to avoid being even deeper in debt, but not that much was spent on goods and services. And you can see that from the statistics on retail sales and what was happening. Well, there’s what a K-shaped curve means. The 1% at the top is doing the savings. What are these savings invested in? They’re loans to the 99%. So the 1% gets richer by lending its savings out to the 99%, borrowing at 0.1 percent for government and charging credit card people 29%. It’s a win-win game. Of course, there’s a K-shaped curve. Of course, the rich are getting richer and their savings are other people’s debts on the opposite side of the balance sheet. But the balance sheet is the 1% on the one hand with the assets, and the 99% with the liabilities. That’s what the economy is looking like. If you do not write down the savings that they have, you’re going to make them into an almost feudal type of landlord or finance-lord aristocracy that’s going to impose an oligarchy here, so if you don’t want it – oligarchy – you have to write down not only the debts, but you have to write down the enormous overgrowth of savings that is what’s holding the debtors in bondage.” – Michael Hudson