20 Mar
More debt: A curious solution to a credit crisis
By Pedro Nicolaci da Costa
A nagging question haunts U.S. government efforts to revive a dormant financial system: Can a crisis that started because of excess credit be solved with more debt?
The typical answer from economists is a qualified no. That is, “No, more credit will not make the problem go away. But yes, the government should do its best to restore bank lending to prevent an even worse economic outcome”.
Yet the refrain out of Washington places a lot of credence on the ability of debt to revive the country’s economy.
…more…