Wednesday, September 29, 2010
Suppose economists recognized the benefits of credit use but for some reason failed to observe the harmful aspects of credit use. What would be the likely outcome?
Likely we would use a lot of credit.
And suppose it went on for many years, economists and policymakers acknowledging the benefits of credit use but failing to recognize the harmful aspects. What would be the likely outcome?
Likely, we would come to rely excessively on credit.
And just suppose that economic growth was inadequate, and one of the recognized benefits of credit use was its "growth-boosting potential." What would be the likely outcome of that?
Likely we would rely even more excessively on credit.
And suppose it so happened that the economy continued to deteriorate, and the underlying reason for inadequate growth was the excessive reliance on credit. What would be the likely outcome?
Likely, economists and policymakers would continue to strengthen and expand the policies that they thought most likely to improve growth: They would continue to rely ever more heavily on credit. Likely, they would be unable to solve the growth problem. Likely, the problem would endure.
Posted by The Arthurian at 4:56 PM