At the end of last year, Americans were borrowing money at the fastest clip since 2008, that could be seen as the bad news. If you prefer to think of it as good news though, at the end of last year, Americans were borrowing money at the fastest clip since 2008. That’s according to the Federal Reserve.
It’s the paradox of debt — leverage, as Wall Street likes to say. According to Matt Phillips, with the business website Quartz, this borrowing is, “for the economy, in the short term, a good thing.” Phillips said this debt isn’t being used for mortgages; mostly people are buying cars with auto loans and borrowing to pay for college.
“In auto loans, there is subprime and subprime has been growing as a share of pie,” said Phillips. “If we do want to do any fundamental reshaping to the way the economy works, a necessary precondition to that is to have economic growth. And if economic growth depends on consumer debt, then as long as it doesn’t get out of control, you can argue that this is a good thing.”
Phillips says the U.S. economy is still largely fueled by debt and consumer spending — and has been for the last 30 years.
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