patrick.net

http://ochousingnews.com/blog/federal-reserves-bad-debt-preservation-policies-weaken-economy/

he Federal Reserve preserved bad debts to mask insolvency in the US banking system; thus more money flows to banks and less money stimulates the economy.

People stimulate economic activity when they borrow money and spend it. Politicians like debt growth and spending for the economic stimulus it provides; however, lenders like debt growth for a different reason; to a lender the initial loan is a sale, so lenders celebrate along with politicians, but lenders look forward the borrower’s interest payments because interest is income to lenders.

Unfortunately, while politicians and lenders celebrated the initial loan and it’s subsequent economic boost, only lenders celebrate the ongoing debt-service payments. Politicians should decry the debt service payments because interest money comes out of the local economy and travels to a lender’s coffers; however, lenders placate politicians through promises of even more borrowing to boost spending and offset the drain caused by debt service. Unfortunately, this is a Ponzi scheme.

Source: http://ochousingnews.com/blog/federal-reserves-bad-debt-preservation-policies-weaken-economy/#ixzz3CA6stbWk

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