Speaking in Trinidad-Tobago, President Obama nonetheless complained, "Banks still are not lending at previous levels." So what? Why would anyone expect banks to lend as much while the economy was shrinking as they did when it was growing? When people buy fewer cars and houses, they don't need as many auto loans and mortgages. When retail businesses and car dealers are raising cash by liquidating inventories, they don't need to borrow to buy more inventories.
When households and firms borrow sensibly, they are borrowing against expected future earnings or against accumulated wealth (assets minus debts). Debt does not allow people to live beyond their means. On the contrary, heavily indebted consumers actually acquire fewer goods over time, because so much of their budget is wasted on interest payments.
RTWT.
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