Jared Bernstein is headed in the right direction
I’m sure that if you could look at the electrical impulses in the typical person’s brain and say “debt” or “deficit” the synapses that fired would be ones associated with negativity. Yet debt has obviously been an economic mainstay since before money existed—members of bartering economies constantly owed one another goods and services. Without debt, very few people would own homes or go to college. But it has a bad reputation right now chiefly because there’s so damn much of it.
Indeed, these two things likely go hand-in-hand. The reason you feel bad about being in debt is because your brain evolved in a pre-monetary society where debt as social obligation was the glue that held the community together.
In a modern monetary economy this is no longer true. Bankruptcy courts and credit agencies have replaced shunning as the means of enforcing promises. Not meeting ones debts no longer implies social death. Indeed, typically the worst that will happen is that you won’t be allowed to borrow again.
Though, as we will see over the next few years that won’t happen either. Creditors have to loan to someone. Broken promises will be forgotten and forgiven because else there is nowhere for the money to go.
Yet, none of this will stop folks from feeling like the creditor has something over the borrower, when in reality the opposite is true.
It will, however, mean outsized profits for the small minorities of human beings born without that particular wiring. We often call them investment bankers.