Economics 101 » Counterpunch: Tells the Facts, Names the Names
The Federal Reserve under Alan Greenspan compensated for the
absence of US consumer income growth with a policy of easy credit and a
policy of driving up home prices with low interest rates. This policy
allowed people to refinance their homes and to spend the inflated equity
in their homes that Greenspan’s policy created.
In other words, an increase in consumer indebtedness and
dissavings drove the economy in the place of the missing growth in
consumer incomes.
Today, consumers are too indebted to borrow, and banks are too
insolvent to lend. Therefore, there is no possibility of further debt
expansion as a substitute for real income growth. An offshored economy
is a dead and exhausted economy.
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