If people smartened up, got out of debt, US go belly up ?

[Tornado69]

If people stopped boring $ and knew how evil credit was, would the US go belly up and crash or would they be able to inflate $ and get out of it ?

[Josem]

your question is predicated on a series of false assumptions and blatant faslehoods.

the idea that borrowing money is evil is a massively silly idea.

[AzDesertRat]

if people paid off their debts and started saving, you would get to a point where the return on savings will be near zero while the cost of the borrowing money will go down to the point where it is almost free.

Now, who can resist free money. [img]/images/graemlins/laugh.gif[/img]

[Copernicus]

[ QUOTE ]
if people paid off their debts and started saving, you would get to a point where the return on savings will be near zero while the cost of the borrowing money will go down to the point where it is almost free.

Now, who can resist free money. [img]/images/graemlins/laugh.gif[/img]

[/ QUOTE ]

define "almost". Lending will always charge an inflation risk premium, there will always be a default risk premium (except for "riskless assets" = short term Treasuries) and there will always be time preference. There is a floor on how low lending rates can be, no matter how much money there is available to lend.

What will happen is a "flight to quality" as rates do get low enough that it is difficult to justify the small risk differentials. That would bid up the prices on Treasuries and begin to make riskier investments more attractive, especially after Treasuries auctions sell out. An equilibrium will be reached for corporate and personal lending that is significantly higher than "free money"

[tolbiny]

[ QUOTE ]
If people stopped boring $ and knew how evil credit was, would the US go belly up and crash or would they be able to inflate $ and get out of it ?

[/ QUOTE ]

People are correct to borrow money under an inflationary policy. It is far better to be a debtor than a creditor under such a system.

[PLOlover]

[ QUOTE ]
if people paid off their debts and started saving, you would get to a point where the return on savings will be near zero while the cost of the borrowing money will go down to the point where it is almost free.

Now, who can resist free money.

[/ QUOTE ]

japan had negative interest rates for a while, alhtough I don't think to consumers, just to big banks or corps.

[Copernicus]

[ QUOTE ]
[ QUOTE ]
if people paid off their debts and started saving, you would get to a point where the return on savings will be near zero while the cost of the borrowing money will go down to the point where it is almost free.

Now, who can resist free money.

[/ QUOTE ]

japan had negative interest rates for a while, alhtough I don't think to consumers, just to big banks or corps.

[/ QUOTE ]

negative interest rates in Japan were actually exchange rate arbitrage between the Japanese yen, which was being supported by the government, and other currencies that were allowed to float.

[AlexM]

Neither. The rich would get less rich though, and so would politicians.

[PLOlover]

[ QUOTE ]
negative interest rates in Japan were actually exchange rate arbitrage between the Japanese yen, which was being supported by the government, and other currencies that were allowed to float.

[/ QUOTE ]

I don't think so, I think it was the japanese central bank discount rate, but I could be wrong.

yep it looks like i was wrong, looks like it was the fed funds equivalent.

http://www.abc.net.au/pm/content/2003/s893425.htm