Credit Crisis Is Good

I have read a lot of commentary about the pending $750 Billion Bill to “fix the frozen credit market”. Most of the commentary seems to be targeted at either the unfairness of bailing out Wall Street or that it is really Main Street that will suffer if the bill is not passed.

Total debt dollar value: today vs 1957

My problem with this analysis is that it ignores what I consider to be the fundamental issue. The credit markets need to be much more restrictive than they have been for the last two decades. Also, I simply do not believe that the credit markets will become completely frozen — at least not for very long. Much more likely is that it will simply become more difficult to get credit, which is a good thing. Admittedly, it may become a bit *too* difficult in the short term, but that is not likely to last as lenders look to find some way to earn at least a modest return.

The chart I’ve included here is from America’s Total Debt Report, an analysis put together by the Grandfather Economic Report. There are many other interesting charts in that report, along with a good description of the situation.

I have heard a few commentators complain that we need this bill because we cannot quit our debt addiction cold turkey. The problem I have with that viewpoint is that debt begets debt. Ask any financial planner how to get out of debt and step one is stop borrowing.