A psalm of balance

The use of credit gives the economy a boost, but also creates debt which eventually undermines the "boost" effect.

Policymakers are well aware that the use of credit boosts the economy. They create all sorts of policies to encourage the use of credit: deductible interest expense, financial deregulation, low interest rates and quantitative easing, for example.

Except in times of crisis, these policies cause the use of credit to grow at an accelerated rate. Therefore, debt ordinarily grows at an accelerated rate.

We have no policy designed to accelerate the repayment of debt. Therefore, debt grows at an accelerated rate until it accumulates enough to create a crisis.

If we insist on having policies that encourage the use of credit, then we must also have policies that accelerate the repayment of private debt.