Interest Rate as a Barrier

Most people have hardly given the idea of debt a second thought over the last thirty years. People buy houses, cars, and furniture on credit. Plastic money takes care of clothes, meals, vacations, and incidentals. If the burden to finally paying it all becomes too great, the debtwise consumer simply activates his line of credit at the bank, borrows more to pay off the other borrowings, and even has a bit of cash left over. That game is rapidly coming to an end because of high interest rates.

Role of Debt

The first considerations about debt are psychological, not financial. Money represents freedom, and when you're in debt you are not free. Cash assets liberate their owner: debt imprisons. The time you spend working is not yours, because the fruits of your labor go to your creditor.Debt decreasing your flexibility. When you're already borrowed to the hilt and an investment opportunity presents itself, you may not be able to take advantage of it.

Deflationary Depression

The second definition of depression is: a period of time when the distortions and misallocations of capital in an economy are liquidated. Every administration for the last seventy years has been confronted with the choice of either propping up the economy to give the impression of more prosperity or allowing it to collapse and liquidate so things can restructure themselves. That, however, would cause bancrupcies, unemployment, and a lot of unpleasantness.