Tuesday, 15 May 2012
Low earners borrowed heavily to spend highly
Successful marketing or irresponsible consumerism? Hold on, the market is supposed to sort out excesses, isn't it? Where is the state's role in all that? It should perhaps see a red light when private household debt reaches 100% of GDP. The rulers should not be that happy when a "domestic consumption driven" economy delivers the output growth that wins elections and reassures voters of "a good grip on the helm".
Cheap money was the result of the "financial innovation" that pumped up the bubble to the unprecedented benefit of the ones at the top. These privileged hypocrites are way fewer than the bottom 10% whose only pre-crisis consolation may be a 40 inch Samsung TV lingering in their sad living room. Some of the low earners are lucky to keep their jobs, but most of them saw their real incomes fall more dramatically over the past 5 years than their apparent wealth went up before 2007.