Tuesday, May 20, 2014

There's nothing wrong with the common trope

At the Slack Wire: The Nonexistent Rise in Household Consumption:

There's a common trope in left and heterodox circles that macroeconomic developments in recent decades have been shaped by "financialization." In particular, it's often argued that the development of new financial markets and instruments for consumer credit has allowed households to choose higher levels of consumption relative to income than they otherwise would. This is not true. Rising debt over the past 30 years is entirely a matter of disinflation and higher interest rates; there has been no long run increase in borrowing.

When Mason says "This is not true" he is referring to the belief that households chose "higher levels of consumption relative to income" for the past 30 years. He is NOT referring to the "common trope" that financialization increased. Obviously financialization increased.

UPDATE 4:25 AM...

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