Is debt keeping our economy afloat?

[moneyfolk]

I was looking at the "US Personal Revolving Credit Debt" counter on top of the forum and I thought what would our economy be like, if we didn't have all this "credit"?

Credit is one of the biggest factors that keeps the economy going. It would be amazing to see what would happen if credit no longer existed? I am not even talking mortgages, student loans, car loans, etc - just credit cards. I think the economy would collapse in one day.

[PRICEPLUS]

We are geared up to be a "consumer" society. In my parents day if you wanted something you saved up to get it or you did without. Our savings rate is, or so I am told, is one of the lowest in the industrialised world.

I think a sudden stop in consumer spending would lead to a world wide economic slump. As economics is an inexact science, in my opinion, it would be hard to say exactly what would happen but I don't think it would be good!

[cercis]

I think if we as a nation started phasing away from debt we'd see a "market correction" but I don't think it would send us into a tailspin. Overall, it'd be much better for us.

[Dingoluv4eva]

Our Economy has nothing backing it up... its not based on Gold reserves or anything..

so pretty much the whole economy is a big scam.,. its all fake..
but as long as greenspan does a good job manpulating the rates and numbers we'll be ok..

but basically we're on some serious credit as a nation.. We are spending money we dont have.

Leverage is risky, but it also brings a lot in..
iif we didnt have all this money, we'd be a lot poorer to the untrained eye.

[jmjj215]

Sometimes our saving rate is even below 0. Do the math on that!

[Bruce Wayne]

Borrowing is ok as long as the economy is growing faster than the borrowing. Its when earnings slow down that problems will hit. In the UK we're experiencing this as the government is having to tax more to meet spending targets so people have less disposable income to pay. This coupled with huge house prices and subsequently high mortgages mean that the British economy is in a fragile state.

[VJW]

Originally Posted by Bruce Wayne

Borrowing is ok as long as the economy is growing faster than the borrowing.

Aye, there’s the rub.

During the 12 years of Reagan/Poppy Bush, the federal debt grew faster than the underlying economy. Of course, during President Clinton’s two terms, the federal debt shrank, then turned into surpluses. During the last five years, the federal debt has once again grown faster than the underlying economy.

Further evidence of failed RightWing economics.

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[stone]

Originally Posted by Dingoluv4eva

Our Economy has nothing backing it up... its not based on Gold reserves or anything..

so pretty much the whole economy is a big scam.,. its all fake..
but as long as greenspan does a good job manpulating the rates and numbers we'll be ok..

but basically we're on some serious credit as a nation.. We are spending money we dont have.

Leverage is risky, but it also brings a lot in..
iif we didnt have all this money, we'd be a lot poorer to the untrained eye.

What is the legitimacy behind the Credit Debt then. If our growth out paces the borrowing then wouldn't debt not be so large? I am a little confused..