Debt makes the world go round
Maybe much of the progress of the past 50 years is an illusion. For sure there have been amazing technological advances but you can make the case that economic life isn't any better.
Two things have helped to grow advanced economies -- women entering the workplace and debt. The merits of requiring two incomes when one used to be enough is a debate for another day but the incredible growth of consumer credit, student debt and lending will have a mixed legacy.
Certainly it's good in many ways. The ability to borrow in order to buy a home is probably the greatest wealth creator of all time. It's a well-regulated market with borrowing rates that are marginally higher than inflation.
Other forms of debt are another story. They've left people so deep underwater that there is no way out. At the same time, interest rates on consumer debt are wildly out of line with the cost of financing, leading to massive profit centers.
Bloomberg has a harrowing, hardly-believable story today about business loans that are extremely predatory, completely unsupervised and essentially without court supervision. Due process is some completely subverted that I can't believe it's taking place in the United States. The greed is mind-numbing.
Yet somehow this is where we are.
What scares me is that -- like women entering the workforce -- you can only pile debt onto people once. After that you're left with an economy where people are spending their marginal income on debt servicing.
It's not just a consumer problem either. Somewhere around 2025, the largest item in the US Federal budget will be debt service.
