Unfortunately Credit and Debt is the opiate of the consumer (to paraphrase Karl Marx, and his views on religion). As long as consumers continue to use Debt, business will continue to rely on it (and the associated expanded spending). Witness the current economic situation where consumer credit is the lubricant of the economy.
Live Within Your Means ?
Forget that, Grandpa! No one needs to live within their means, when interest rates continue at these historic lows. Next thing you will be telling me is that interest rates will go up? Concepts like house poor seems to have disappeared from our money vocabulary.
Interest rates are down now, credit is easy now, so the economy seems to be saying, live now, pay later. You only live once, after all. Can I afford to buy this, is another concept that has disappeared from our financial lexicon. The most important thing is to have a good credit rating.
What would the economy look like if most consumers decided, “I can’t afford that”? The constriction might change a lot of things.
Credit is Limitless (i.e. Pay Later)
Anyone can get credit now, no one gets turned down for a mortgage, and if they do, you have blundered mortgages, sorry blended mortgages. Have you heard of anyone being turned down for a mortgage lately? Anybody who wants a new car does not get a loan or lease for a pickup truck? Credit is the lubricant on those transactions.
Will we run out of the lubricant? Will debt get tighter soon? All economic models in North America rely on free spending consumers, and tight debt rules would be the sand in the lubricant of the economy.
Remember, eventually, all debts must be paid, but when will that reckoning be? Perhaps sooner than we wish?