Friday, December 7, 2012


Why did GDP growth falter?

The rising cost of interest, a result of our ever-increasing reliance on credit, drove up the financial cost of production. This cost drew income away from labor, causing a subtle decrease in the growth of demand. That same cost drew profit away from productive ("nonfinancial") enterprise, undermining the incentive for productive sector growth. And that same cost boosted the profit of the financial sector, enhancing the incentive for financial sector growth. Policy encouraged all of this, on the grounds that credit use is always good for growth.

GDP faltered because of our excessive reliance on credit.
From mine of 22 November.

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