One potential explanation for seeing people merrily shopping during a recession is that the shopper is maxing out his credit lines.
What is happening today is that the U.S. government is spending 1.6 trillion dollars more each year than they are taking in and the government is maxing out its credit lines.
Where do you suppose that 1.6 trillion dollars is going? How much longer can such money be supplied? What must happen to economic activity if a large portion of the 1.6 trillion dollars stops flowing?
Keep in mind that the U.S. government is not an exception in this matter but is merely behaving as most governments are throughout the world.
Mr. Tell, I appreciate the notion that people are “maxing out credit.” But I’ve heard this explanation now for almost three years. You don’t “max out” credit for three years. Trust me. I used to do it. It’s gone in a few months. With home prices falling, people can’t be taking out money from their houses. So I just don’t buy the hypothesis that consumer spending is the result of a boom in credit. Moreover, credit rates are high as heck, while banks won’t lend to ANYONE. (I have stellar credit and couldn’t get a lousy loan for $50k for my business from Chase, which I dealt with for 30 years).