Reportedly we’re borrowing again.
Is that a good thing?
A financial writer in a recent media piece says that, ordinarily, high levels of borrowing across the country stoke the national economy, as those incoming funds obviously go back out into the marketplace to purchase homes, automobiles, furnishings and other items.
And that is manifestly a good thing, provided that the middle-class demographic doing most of the borrowing has steady access to meaningful employment and progressively rising wages.
That connected duality — steady consumption of goods and services coupled with wage increases — has in fact driven American economic growth historically.
When one of those connected pieces gets thrown out of whack, though, says writer Rex Nutting, the capitalist model breaks down.
Nutting fears that this is precisely what is happening presently. On the one hand, governmental policies regarding interest rates and related factors have resulted in a resurgence of national borrowing, which is indeed resulting in increased consumption and propping up the economy. On the other hand, though, notes Nutting, wages have not been rising in any meaningful way, meaning that many Americans are simply falling into debt once again not long after they needed urgent debt relief to pull away from significant financial challenges.
“It’s not a sustainable model,” says Nutting, who points to a concern that too many people nationally, including in Florida, are simply borrowing freely once again, engaging in consumption-related behaviors and not paying back the full amount of what they owe.
Nutting cites a high likelihood that thdebt relief te country will undergo “a long period of stagnation” if substantial job creation and rising incomes do not soon surface.
Source: The Wall Street Journal, “Middle class is drowning in debt, hobbling the economy,” Rex Nutting, June 27, 2014