Debt is good for us*. Consumer credit is good for us*. Our bankruptcy laws have been good for us*.
[*- in the aggregate.]
Yes, I'm serious.
Before you break your wrist diving for the keyboard to tell me I'm crazy, I must make one small request: Take the time to listen to the podcast at the following link...
EconTalk: Zywicki on Debt and Bankruptcy
After you've done that, then feel free to tell me I'm crazy. And take a number.
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Hats off to Dr. Russell Roberts for conducting another enlightening interview.
One very visible indicator of structural problems in the US economy prior to the blowup was the fact that average household debt was growing faster than income. However, it appears likely that this value was skewed by home buyers in bubble areas not only wracking up enormous debt on plainly overpriced homes, but digging themselves in deeper with cash-out refinancing and HELOCs. Debt, like money, is not the root of all evil, but what you get for it makes all the difference.
Zywicky raises an interesting point on nonrecourse loans as a moral hazard. I don't think nonrecourse loans had any causal effect on the housing boom since few homeowners actually needed to foreclose in a rising market. However, outlawing nonrecourse loans especially or specifically for jumbo loans would certainly help minimize banking crises in the future.
Posted by: woodchuck64 | 18 March 2009 at 18:19
Yep, you are crazy. This Zywicky guy is saying that layaway is so much worse than using a credit card. How is that even remotely logical? Anyone paying on layaway misses out on instant gratification but pays NO INTEREST! A person not paying off a credit card every month (your most likely layaway candidate) AT BEST is paying 10% interest and likely MUCH MORE. This is just logical fallacy number one in a long list of idiocy in Zywicky's puff piece. What are you even trying for here?
Posted by: rufusmcbufus | 19 March 2009 at 00:14