[I]n the 20 years leading up to 2007, incomes scarcely rose. But standards of living went up anyway. How was it possible? Easy. Instead of saving 8% of their incomes, as they had for the previous 5 decades, they spent the money. The savings rate fell to near zero. Debt increased. Of course, you can only take a thing like that so far. In this case, the end of the credit expansion came three years ago. All of a sudden consumers were faced with a grim prospect. They could no longer spend money they didn’t have. Now they had to NOT spend money they DID have. It was pay back time…time to return the money they had borrowed during those carefree years.
Settling up was so alarming and so disagreeable that the feds swung into action to prevent it.
Bill Bonner takes the clothes off our kings with a few deft remarks.
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