The U.S. recovery is hobbled by an economic divide that separates Americans not by income or wealth but by their access to credit.
The housing bust left behind millions of people with credit records damaged by plunging home prices, lost jobs, past overspending or bad luck. Many are now walled off from the low interest rates engineered by the Federal Reserve to spur the economy and remedy the aftereffects of the borrowing boom.
Credit does not bring prosperity. It is a ponzi scheme.
Only economic surplus -- that is, savings -- produces prosperity. It does so through capital formation which has as its predicate savings.
Borrowing is a short-term elixer that has its place, but it requires more surplus to pay back borrowing than to simply save in the first place, as you must pay both the original borrowed funds and the interest. This in turn means that when you borrow you are not only time-shifting your requirement for surplus to tomorrow you are amplifying it at the same time.
If there is no surplus with which to pay the borrowing back then borrowed funds are a ponzi scheme that can only lead to bankruptcy unless a "greater fool" appears to take whatever you bought off your hands at a higher price.
Further, very low interest rates are a signal from The Fed that they expect crap economic performance. The rational person who has access to cheap credit but doubts their ability to generate economic surplus in the future is a fool to borrow as they are simply generating their future bankruptcy by doing so irrespective of interest rate! When you have a bunch of academics saying through their policy pronouncements that the economy will be crappy and the government will be handing out borrowed money through a fire hose, thereby destroying the purchasing power of surplus capital, you are sending a strong signal to the market that it's stupid to borrow money.
This is basic logic and no amount of arm-waving and bearded showmanship will -- or can -- change it.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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