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Why Enormous Personal Debt Means A More Vibrant Economy

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Jul 12 2007 12:00am EDT

Why Enormous Personal Debt Means a More Vibrant Economy

Chris Dillow finds a silver lining to the ever-increasing amounts of leverage bidding up asset prices around the world:

My generation (early 40s and older) left college with little debt, and could buy relatively cheap housing. As a result, we could save, build up housing equity, and perhaps pay off our mortgage quickly. This means many of us are in a position to downshift (as I did years ago) or look forward to early retirement.
This means the economy could lose a cohort of highly-skilled workers.
However, more recent graduates are saddled with debt and high mortgages, and so will have to work longer. This improves the long-run supply potential of the economy.

This is the point at which happiness researchers start jumping up and down and saying that people in rich economies who work themselves to death are hardly the happier for it. But that's downright uncapitalist, that is. Here's to cripplingly-large mortgages and student loans!

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