We use credit for money

I say debt is caused not by excessive spending, but by the use of credit. You think that's just silly. You think excessive spending causes the use of credit.

I agree: Sure it does. Sometimes.

You: All the time.

(I do not point out that if the Prodigal Son wastes his whole inheritance but not a penny more, he has spent excessively without using credit.)

Me: No. Excessive spending is one cause of credit-use. There are other causes.

You: That cannot be. Excessive spending -- spending in excess of income -- always results in the use of credit. There can be no other cause.

(I do not point out that if one saves 75% of one's income, and spends a frugal 30% of income by borrowing 5%, this also results in the use of credit.)

Me: Okay. But what you are telling me is: IF A > B THEN (B-A) < 0. That is a mathematical definition, and it is certainly true. But it is not a cause. The mathematical definition is true always -- even when we do not have a deficit. Why do we have deficits?

You: Well, the reason is corruption... the special interests... greed... liberal thinking... forgetting conservative principles. The reason is whatever causes spending to be more than government brings in.

Me: Oh, you are right about that: The reason is whatever causes spending to be more than government brings in. Yes, indeed. It may be that spending is excessive. Or it may be that spending is not excessive but still greater than 'B', if you know what I mean. We will never solve these budget imbalances until we discover the real cause of excessive credit use, and fix that specific problem.

And what is the real cause of excessive credit use? The cause is economic policy:

  •  It is policy to withdraw spending-money from the economy.

  •  It is policy to encourage spending.

  •  It is policy to encourage the use of credit.

  •  It is policy to encourage the accumulation of debt.


Why do we have all this debt? Because we use all that credit. It's policy.