In American society, 'debt' and 'income' have become increasingly synonymous over the past 3 decades; but as Rick Santelli blasts (commonsensically), "they certainly shouldn't be." It appears the average joe has been led to this conclusion by the Central Banks. Rhetorically asking "where's the horsepower in the economy coming from?" Rick reflects on the auto-loan fears we discussed earlier, santelli notes that 55% of used cars (and 30% of new cars) are financed by subprime lenders... and rages, "if we continue as a country to fuel our consumerism with debt, there is no way the bond market's going to be wrong."
The bottom line, Santelli concludes,
"Until we start to get the income equation moving, the central banks can't do enough. ultimately, end game, can't fuel an economy on debt."
As we noted earlier...(via Macronomics),
"When somebody has too much debt and cannot reimburse it, how do you bail him out? Obviously by restructuring his debts, which imply losses for his creditors.
But when one lends him more money in order for him to pay back what he owes, he is not bailing him out but rather pushing him in a bigger hole! The game until now has been to "print" more money and to add more debt on the shoulders on the indebted ones, to gain some time in the hope that growth will resume and reduce de facto the weight of the existing debt burden and the additional new debt issued to support the initial debt troubles.
This is a big misunderstanding of debt dynamics and its effects on the economy. When debt becomes too big, which it is now the case in many parts of Europe, the servicing drains all the available cash flows and reduces the growth potential."