The argument leaves something out

From the Boston Fed: Credit History / The Evolution of Consumer Credit in America (PDF):

Nineteenth century Americans had more than their share of financial pressures, and they weren’t opposed to borrowing. It’s just that they rarely went into debt for things that were fun or frivolous...

But the definition of “luxury” or “nonessential” has a way of changing from one generation to the next. In 1980 most Americans still thought home computers were frills or expensive toys; color televisions were luxury items in 1960; second bathrooms were a relative luxury in 1940; ditto for cars, refrigerators, and washing machines in 1920. Yet by 21st century standards, using credit to acquire any one of these things is neither extravagant nor extraordinary.

Okay. Sure. We use credit more now than we did years back. No shit. But the analysis always stops there and, explicitly or implicitly, we are told that the character of the American people has declined. We're just not as good as people used to be.

Well, I don't like that argument too much. Maybe it's true that our character has declined. I couldn't say. But the argument, the argument leaves something out.

Every time policymakers decide they need to boost economic growth, they come up with a plan to expand the availability and use of credit. It's not something that happened once. It seems to happen in every decade and under every President.

That long-term focus on boosting the use of credit surely contributed much to the change in our credit habits. That part of the story is always left out.


If you happen to think that our "character" has declined or our "moral fiber" has declined, and our use of credit is evidence of this, then you can go F yourself. On the other hand, if you think that policies promoting the use of credit are the big part of the problem, then I'm with you.

And if you think that the gradual, long-term increase in our use of credit increased the financial costs embedded in the cost of living and in the cost of things we buy and sell, then you and I have something in common: You and I can see what's wrong with the economy.