Why Do Economists Love Debt So Much?

“Mainstream” economics today is home to some rather strange views.

Most economists think inflation is good, even something to aim for. They believe that lots of debt is healthy and performance-enhancing.

I couldn’t disagree with these assertions more. So it usually pains me to read the mainstream financial analysis.

Despite this, sometimes I read The New York Times or The Wall Street Journal to gauge what the establishment is thinking.

It’s important to understand these views because most of the writers at mainstream outlets happen to share about 99% of their financial views with bankers, central bankers, and most politicians.

Still, I was in for a shock when I came across David Leonhardt’s latest New York Times piece, “Fix the Debt Freakout”. In it, the author scolds debt hawks for their silly thinking. Here’s an excerpt (emphasis mine):

But the mistake that the United States and Europe have made in recent years has not been to issue too much debt. It has been to issue too little – and scrimp on investment in education, transportation and so on.

What? Too little debt? The U.S. national debt alone has grown from around $6 trillion in 2000 to more than $21 trillion today. It is still accelerating, currently increasing by more than $1 trillion a year, and we’re not even in a recession (officially).

Mr. Leonhardt continues the madness a few lines down.

To cluck about the debt may sound sober-minded and responsible. But it often isn’t. Instead, it can be bad economic policy that hurts the country – including future generations.

Wait… So if we don’t take on enough debt, it’ll hurt the country and future generations? If we live within our means, harm will come to our children? What kind of logic is that?

It’s madness, and, unfortunately, this is how most of the financial establishment sees the world. It seems to view debt as a very useful political tool and massive deficits as unavoidable.

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Gary Anderson 3 months ago Contributor's comment

Debt makes the holders of that debt and those who hold the bonds derived from debt, richer. Everyone else drowns but the elite get a massive pay raise.