Op-Ed: Federal Reserve Still Blowing Bubbles
Debt-fueled recovery is no recovery at all.
Money isn't inherently evil: It can be used to support charities or take vacations. It can be saved for a rainy day, or invested in capital equipment, research, or technology. But it can also be squandered on depreciating assets - McMansions, luxury cars, flatscreen TVs and other such trinkets.
To be clear, buying these things isn't wrong; buying them with borrowed money that you aren't capable of paying back is. Similarly, lending money to people and companies who cannot pay it back in order to generate short-term profits is unethical. And creating financial-leverage products that deliberately mislead investors, regulators, accountants and the public - well, that's criminal, too.
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Total credit-market debt as a percentage of Gross Domestic Product has risen from 130% of GDP in 1952 to 350% of GDP today. The various bailout and stimulus schemes enacted in the last year will drive this percentage above 400% soon. When a country allows this much debt to accumulate versus its GDP, something is seriously wrong.
If the debt had been used constructively -- to build refineries, lay pipelines, replace decaying water pipes, build nuclear power plants, repair our 156,000 structurally deficient bridges, or research and develop cutting-edge energy, biotech or nanotech technologies -- the increase may have had some rationale.
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