Even worse, the new credit is used in a carry trade where one country (e.g. Euro, then Asia/Australia, soon Canada) guarantees a strong currency and another (e.g. Japan, then U.S., now Euro) deliberately weakens theirs to spur credit-based consumption and exports. The world is ping-ponging between the various strong currency countries (lending at realistic interest rates) and the weak currency countries lending at unrealistically low rates. As they shift, the malinvestments they create unwind, sometimes rapidly (e.g. 2008) and cause enormous deleveraging that toasts the banks involved in the trades.
It’s all really simple when boiled down, isn’t it? If you try to trick people, it eventually catches up with you. A ponzi scheme by any other name.
Follow a traditional free market that investors have understood all their lives [with low taxes/regulation], and you unleash investors to dream big — that’s the key to long term growth and a robust economy that can bounce back when something bad happens.