Friday, September 18, 2015
It sometimes confuses people when I distinguish between debt and the use of credit. I say things like: Using credit is good for the economy, and debt is bad for the economy.
I think the confusion arises because people don't distinguish between debt and credit use as I do. Okay. So try this on for size:
It is not because we owe money that the economy becomes vigorous. It is because we spend more money than our incomes allow.
Now you'll probably say in the not too distant past we spent way more than our incomes allowed, and the economy was awful.
Yes. Because there was already a massive accumulation of existing debt, the stuff that's bad for the economy. There was so much of it that we couldn't spend enough more than our incomes to make the economy good again. The bad outweighed the good.
And if you notice, it's the good thing -- the borrowing and spending beyond our income -- that adds to existing debt and makes the bad thing a bigger problem.
Posted by The Arthurian at 4:00 AM