Guest Post: Why Our Consumer-Debt Dependent Economy Is Doomed
by Charles Hugh-Smith
If you understand the difference between the first pair of shoes and the 25th, you understand why America’s debt-dependent consumer economy is doomed.
Yesterday I explained Why We’re Stuck with a Bubble Economy:
Now that interest rates are near-zero and mortgage rates are rising from historic lows, there is no more juice to be squeezed from low rates. Asset bubbles always burst, destroying collateral and rendering borrowers and lenders alike insolvent.
Without organic demand from rising real income and new households with good-paying jobs and low levels of debt, the consumer-debt based economy stagnates. This has left the economy dependent on serial asset bubbles that create phantom collateral that can support new debt, albeit temporarily.