When I studied economics I was taught that debt and inflation was not a good thing. Nowadays most economists think inflation is good, even something to aim for. They believe that lots of debt is healthy and performance-enhancing. I could not disagree more. It often turns my stomach upside down when I read mainstream financial analysis or economist’s reports. But what bugs me even more is, that these so called “economic experts” share their financial views with bankers, central bankers and politicians.
So what are they saying? We have too little debt? Where are their brains? The U.S. national debt alone has grown from around USD 6 trillion in 2000 to more than USD 21 trillion today. It is still accelerating, currently increasing by more than USD 1 trillion a year and there is no recession yet.
These “Analysts” even believe that if we do not take on enough debt, it will hurt the country and future generations. So, does this mean, when we live within our means, harm will come to our children? What kind of logic is that? This is pure madness and unfortunately, this is how most of the financial establishment sees the world. It seems to view debt as a very useful political tool and massive deficits as unavoidable. There is zero thought given to long-term repercussions. And there is never a serious discussion about how to pay it off.
Let’s look at the last financial crisis in 2008! A small temporary slowdown in the growth of credit, almost destroyed the entire economy. When a system is as highly leveraged as ours, even a brief slowdown can be devastating. The Federal Reserve Bank stopped our system from failing only through desperate measures. It quickly lowered interest rates and kept rates at zero for nearly a decade. The economy became even more reliant on debt to function.
I believe this is the real reason mainstream economists and especially politicians love debt. They fully realize that without more debt and ever-easier monetary conditions, the system will collapse. But don’t they realize that a day of reckoning has to come? The current system is the definition of unsustainable. But nobody wants it to happen yet. So, they kick the can farther down the road, making the eventual reckoning more severe each time. This is why they love a higher inflation, too. They just hope that higher inflation will eat up our debt, not thinking what repercussion high inflation carries.
I do not want to think about the dark consequences this will have. I still hope that people find their way back to basic economics and realize the gravity of our situation. We must start slowing and eliminating wasteful government spending now, if we hope to avoid epic disasters.
Sven Franssen