Credit crisis or a debt crisis?
Some people subscribe to the notion that the U.S. economy is recovering from the Great Recession. Others subscribe to the notion that the U.S. economy is entering, has entered, the Greater Depression. But regardless of which notion one chooses to embrace, let’s consider the question of this debate.
Did the U.S. economy enter into the current recession because of too much debt, or too little credit? If the recession is the result of too much debt, then the economy is suffering the consequences of too much debt, and hence the crisis that began in earnest during 08’ and continues until this day, is a debt crisis.
But if the recession is the result of too much credit or not enough credit, then the economy is suffering the consequences of credit availability, and hence the crisis that began in earnest during 08’ and continues until this day, is a credit crisis.
Either way, the crisis must be the result of debt or credit, proper.
Credit cannot benefit an economy. Ever! After all, until credit becomes a debt it is not contributing to the economy.
(I may argue these premises if no one takes the torch.)
Obvious Credit Crisis
Side Score: 7
Debt crisis properly
Side Score: 0
Well, is this question geared towards commercial or central bank credit and individual or government debt?
Credit and debt are closely intertwined, so it is difficult to distinguish or pinpoint one in particular.
Therefore, most of the crisis is contributed to the central bank and partially government debt.
Apart from the inherent harm of the Federal Reserve's power over credit and money through their arbitrary decision making in micromanaging the economy without any oversight, the easily availability of credit is the systematic cause of the crisis and any of those before.
The easily availability of credit from the central bank to commercial banks is accomplished by lower interest rates for an extended period of time, which ultimately it increases the money supply due to the excessive credit creation, speculative bubbles and lowers savings; in other words, it is inflation. This doesn't account for the money that the government wants printed.
This is the result in a volatile and unstable imbalance between savings and investment, which creates the illusion of investment and is the cause of the crash of 2008.
Of course, there are experts who would disagree on principle.
However, government debt is the byproduct of easy credit and entitlement programs. Entitlement programs account for 52% of the federal government budget where these would include Medicare, Medicaid, Social Security, Welfare, Unemployment insurance and Child Services. Chart In order for the government to pay for these programs, unfortunately, more credit and more money is needed.
As of right now, government debt is a problem but not a crisis. Why?
The United States credit ratings is still a AAA rating, but it would become a crisis if it would be down rated to a AA+. Then, the government would have difficultly in getting loans due to the insane amount of debt, the 13 trillion dollars, and creditors would wonder if the government is still good on their loans, and many programs would be in jeopardy.
Also, since some of United States debt is foreign, there are all sorts of problems that could arise.
Lastly, individual debt is just plain stupidity.
Side: Obvious Credit Crisis
Every single dollar in existence has entered commerce as a debt. There are no dollars in the economy which do not represent a principal debt. Thusly, if the economy does not have enough money for the service of its debts then the current crisis is a debt crisis and not a credit crisis.
Albeit, I do agree that the Federal Reserve has laid the foundation for the U.S. economy to perpetually suck off its credit tit.
“End the Fed!”
(Did you know that the economy is debt-based and not credit-based?)
Side: Debt crisis properly
Every single dollar in existence has entered commerce as a debt.
Is this reference to the "this note is legal tender for all debts, public and private."
All money is created on the basis in the payment of debt.
Well, as noted before, credit and debt are closely intertwined because many large sums of debt is supported by credit. Therefore, without credit, generally, there is no debt.
How could one be in debt without credit?
If money was meaningless, everyone could live endless credit without having to work, and consequently, debt would be meaningless.
Therefore, in order for debt, money must value and desire.
Side: Obvious Credit Crisis
The problem is/was too much credit. This was not by accident. It began in the 1980's under the Reagan Administration with deregulation of lending institutions. "Trickle down economics". Many other measures during this time contributed as well, such as the massacre of laborers ability to organize for assurance of fair treatment.
So, for the next 20-30 years, lenders were indiscriminately handing out money to anyone with a pulse for anything that struck their fancy. Houses, cars, vacations, et al. These are not stupid people. They knew there would be no way for all this debt to be repaid. Obviously they must have had an inclination that Uncle Sam would come to their rescue when their house of cards collapsed. Funny how they lobbied so hard in the 80's for "free markets" and deregulation of government oversight until the shit hits the fan in 2008,at which time they cried like a spoiled kid and got bailed out by said government.
In conclusion, it was an orchestrated robbery of epic proportions. A massive shift of wealth from the bottom 90 + percent of people to the top 10% or so over the past 30+ years. And what did these criminals get for their injustice? Bailed out... million dollar bonuses.. a label of "too big to fail"..
The economy is pretty much a joke.. the game is rigged folks..
Side: Obvious Credit Crisis
No arguments found. Add one!