Thoughts on debt – public and private
* Debt is not wealth. The notion that debt = wealth has been stealthily inserted into the American (and world) psyche over the past 100 years and. Until recently it has rarely been questioned. So people refer to themselves as homeowners or car owners, when they don’t own those things yet.
*If your stuff isn’t paid for, the seller still owns it. Don’t believe me? Stop making payments and see how long you get to keep the car, or the house. Well, maybe not the house. Since demand has declined so drastically over the past few years, the banks aren’t so anxious to take those over-mortgaged houses back. Charged it on a credit card? You don’t own it until the card is paid off entirely.
Schools and bankers need to stop teaching that you have to borrow to be a real adult. Or that you have to have a “good credit score.” Or that “you have to learn how to use debt.” Or that it is worth your precious time and energy to borrow tens of thousands of dollars just to get a credential or degree, then spend the next 10 years paying it off.
* GDP = public + private spending + borrowing. This is a formula for disaster. Changes in GDP are used by economists to tell us how we are doing economically. This gives the usual suspects at state and federal levels reasons to advocate for more government spending. It’s to make economic growth appear to be increasing. They call it “investing.” Which brings us to our next point.
* Spending on consumables is not investing. Even if there is a supposedly good outcome, as in people with more credentials or degrees, the value does not manifest until those people actually start to produce new things of value… if they ever do. Sometimes that little credentialing game can go on and on in many iterations without ever producing anything of real value.
* Stability = mild inflation. If you read between the lines of the economic prescribers, they are usually opposing cuts in government spending. “In fact,” they claim, “since things are so bad, we should spend more!” Thank goodness, the public is catching on. That’s why the U.S. House Republicans, especially the leadership, have just discovered their backbones, to everyone’s surprise.
Although many commentators are still using their favorite pejoratives to apply to Repr. Ron Paul (R.-Texas), he is now able to chuckle. After more than two decades of making his points: audit the Fed and cut spending, etc., he has recently turned around and noticed that his followers and admirers are increasing.