I gave up making sense of it when in a single thread there was a point made that our economy country runs on debt and a point made that debt repayment adds nothing to the economy.
I figure that I am simply too dense to understand.[/quote]
FSD, look at the context of my responses.
I never said that debt repayment adds nothing to the economy. I was responding to a comment by jpinpb who suggested that if people don’t pay their mortgages and spend the money they save, they are helping immediately the economy.
In this situation, it’s just coincidental that the more money spent up front, now, the bigger the immediate boost to the economy. It’s a short term boost.
I’m not saying that debt payment avoidance should be economic policy either. As you rightly pointed out, in the longer term that would be a problem. Banks would lack capital to lend and people who relied on the money would have to cut back.[/quote]
I guess I misinterpreted your statment that “debt repayment does not contribute to economic activity” as “debt repayment adds nothing to the economy”
I should have interpreted it as “debt repayment adds nothing to economic activity”
So, replace “the economy” with “economic activity” and my point still stands.
In fact there can be short-term negative impacts to people not paying their mortgages. Consider the impact of those who stopped making payments back in 2007 because their subprime mortgage reset. Even though those folks got a free ride for at least 3-6 months, the overall short-term impact to economic activity was negative.
I think jpinpb made a compelling argument from a microeconomic viewpoint which may not hold up in the macro sense, because the overall economy has feedbacks and other complexities.
