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Thursday, June 11, 2009
You have heard of the third-world debt crisis: now for the one in the first world. Ordinary people, up to their necks in debt, will bear the brunt while the rich get off scot-free
British and American consumers are obedient and compliant. When the central bank chiefs of America and Britain, Alan Greenspan and Eddie George, sidled up to them in the 1980s and 1990s, nodded and winked, they took the hint, and dutifully embarked on a binge of borrowing and spending. The nod and the wink were never explicit, but the easy money policies that deregulated lending, boosted credit card companies and lowered interest rates have provided the incentives for consumers (on declining incomes) to borrow like there's no tomorrow. That, consumers rightly calculate, is just what the powers that be want them to do.
And so debt has spiralled. By borrowing and spending, the middle-class consumers of the US and the UK, heroically and almost single-handedly, are holding up damaged economies, scarred by the bursting of asset bubbles such as stocks, telecoms and dotcoms. These bubbles, in turn, had their origins in the credit bubble created by central bankers and other deregulators.
But one group of people has stayed away from the party: the rich. According to the new annual report on the global econ- omy from the New Economics Foundation (NEF), the rich have declined to become heavily indebted, both in the US and the UK. They have sat idly by and watched as central bankers helped inflate a credit bubble, which then flowed into and fortuitously pumped up the value of assets, including property.
sketched by dweller at 11:41 pm
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