Credit the Good Economy

It’s becoming a common theme – the economy is in great shape! Whether you want to give credit to Trump or Obama, it’s definitely all about policy of some kind, right?

Wrong.

Barataria has been revisiting some old arguments to build a new study for how the economy is changing. As the Managed Depression of 2000-2017 moves behind us, the reshaping of how we work, shop, and generally get by is starting to take shape. It’s hard to be sure about much.

One thing we do know – none of this happened overnight. So let’s revisit some old discussion.

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No Credit / Bad Credit

A lot is going on in my life.  I’ll explain later.  Meanwhile, this post from a year ago is becoming more important all the time.

If you’re like most people, you probably think that you can never have too much access to credit. After all, you never know what might go horribly wrong or when an opportunity to really follow your dream might come up. A little scratch ready in the background might be the difference between the good life and something much less.

Then again, a lot of credit has a corrosive effect. In a world saturated with borrowing everything is judged against the expected return if the money was simply loaned out at market rates. It seems reasonable that where a little credit is a good thing a lot of credit, defining everything in the world, is the biggest enemy of both long-term thinking and a society looking to maximize happiness and human potential.

Logic says that where a little credit is good a lot could be bad, meaning there is an optimal point. Where is that? Where are we with respect to a good level of credit? It turns out that train left the station a very long time ago – and this may explain a lot of the problems in this economy.

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Too Much Credit?

If you’re like most people, you probably think that you can never have too much access to credit. After all, you never know what might go horribly wrong or when an opportunity to really follow your dream might come up. A little scratch ready in the background might be the difference between the good life and something much less.

Then again, a lot of credit has a corrosive effect. In a world saturated with borrowing everything is judged against the expected return if the money was simply loaned out at market rates. It seems reasonable that where a little credit is a good thing a lot of credit, defining everything in the world, is the biggest enemy of both long-term thinking and a society looking to maximize happiness and human potential.

Logic says that where a little credit is good a lot could be bad, meaning there is an optimal point. Where is that? Where are we with respect to a good level of credit? It turns out that train left the station a very long time ago – and this may explain a lot of the problems in this economy.

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The Underground Economy

Given the holiday and a lot of work to do, it’s time for a repeat.  This one goes with along with my musings on Velocity and Inflation like a hand in a glove – why isn’t there more inflation?  We’ve had a small series this week on that topic, and this brings it back home.  Have a Good Friday and a Happy Easter!

It’s good to have a lot of money, assuming that not everyone has a lot.  Inequality is apparently bad when it gets too big, but it also makes the whole economy possible in small doses.  But how much money is really out there, and where is it going?  It turns out that this is more complicated – and hidden – than most thought.

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Three Views of an Economy

When the summer livin’ is easy, I enjoy sitting out on the porch with a few tunes.  Today’s lazing soundtrack was “Three Views of a Secret” by Jaco Pastorius as I went over some old posts to see if anything needed revisiting.  And this piece from July 2011 popped out as a debate that is still raging – but with some resolution.  It seemed to fit the tension that always builds in a Jaco piece.

Economists, as noted before, have widely divergent views about the economic situation and what should be done about it.  But the experiments that have been running through various economies are teaching us all a little bit along the way as to who may be right.  It’s worth revisiting.

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