"First Principles"

From A special report on debt: Repent at leisure, The Economist, 24 Jun 2010

To understand why debt may have become a burden rather than a boon, it is necessary to go back to first principles. Why do people, companies and countries borrow?

Why do people do anything??? For profit or for personal satisfaction, according to an old tax document I read. (If they do it for profit, they use a business tax form. If they do it for personal satisfaction, they use an individual tax form. Cut'n'dry.)

But why do we borrow this much instead of this much? Depends who ya ask, I guess. But I say: Because of policy.

Policymakers got it wrong. They thought too much money would cause inflation but too much credit-use wouldn't. So they restricted the money we spend, and encouraged us to save and borrow. These encouragements are embedded in policy.

If we borrowed too much, it is because of policy. If we didn't save enough, it's because we didn't have money to save because they restricted it. If we had inflation, it was because we spent too much credit-money, not too much M1 money. If we accumulated too much debt, it is because policy allowed and encouraged that behavior.

The way the world is today, is the result of policy. Bad policy.

Why do we borrow so much? Because of policy.