Wednesday, August 24, 2011

You Know what Cheap Debt Gets You?

If you answer "more debt" then you're right.  Unlike the macroeconomy where there are numerous levers to pull to manage deficit and debt, on the micro side (i.e. household) the levers to manage deficit and debt are quite limited.  If you run up a debt, you have limited choices:

  1. Suck it up and pay it
  2. Renegotiate the debt with the rentier
  3. Default on the debt and go into credit exile
Not much else is open to you as an individual.  Unless you have a rich relative die and leave you a fortune, I suppose.  So when you see a chart like this, the nature of the "debt overhang" becomes clear.
The Debt of Damocles - From Kevin Drum
What the government needs to do is to create jobs, jobs, jobs.  Not give more money to the misnamed "job creators" who are busy laying people off while paying no income taxes.  Rather, commence a WPA-level public works program that puts the unemployed to work doing things the nation needs done. Build bridges, roads and dams.  Build a national high-speed rail system.  Build a national high-speed wireless Internet infrastructure.  Do something with the millions of unemployed American workers.  Give them some hope, some dignity and a paycheck they'll use to buy goods and services and get the economy moving again.

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