We use dogmatic, open-ended rules of thumb in our economic thinking, rules of thumb like "Printing money causes inflation" and "Credit use is good for growth."
|The inflation rule tells us that if there is inflation, they must be printing too much money. But the rule doesn't ever have us check to see if there is even any money left.|
|The credit rule tells us that if we want the economy to grow, we need to use more credit. This rule doesn't ever have us stop to see if we've used too much credit and accumulated too much debt already. The rule just tells us to use more credit.|
These two rules of thumb together created the problems in our economy. We always restrict the quantity of money, and we always use more credit.
It is time to change the rules.