Thursday, April 27, 2017

Simple answers

Lookin up somethin in Bezemer & Hudson's Finance Is Not the Economy, I get as far as the opening sentence:

Why have economies polarized so sharply since the 1980s, and especially since the 2008 crisis?

Why are they focusing on the years since the 2008 crisis? or more remotely, on the years since the 1980s? It was the years before 2008 that led to 2008. It was the time before the 1980s that led to the 1980s. People like to look at consequences of economic problems, and attempt to fix consequences. No wonder we reliably fail.

Moving on, then, I get as far as their next sentence:

How did we get so indebted without real wage and living standards rising, while cities, states, and entire nations are falling into default?

How did we get so indebted? That's easy: We think we need credit for growth. So economic policy does many things to encourage the use of credit. But when we use credit, we increase our debt.

Economic policy makes our debt increase. That's our debt I mean, not the government debt.

Economic policy encourages us to use credit, and does nothing about the resulting debt. Therefore, our debt accumulates.

That is how we got so indebted.

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