We should pay down our debts

From Channel 4 News’s early evening Snowmail shot:

…the day started badly for the PM after his speech was briefed to journalists. It contained a dramatic passage apparently telling the nation: “The only way out of a debt crisis is to deal with your debts. That means households – all of us – paying off the credit card and store card bills.”

When economists left, right and centre attacked the idea saying it would take demand out of the economy and could make things a lot worse the press was told it was all a big mistake. A “sloppy draft” had been misinterpreted. And by the time the speech was made the passage had been changed to “The only way out of a debt crisis is to deal with your debts. That’s why households – all of us – are paying off the credit card and store card bills”.

It is now not clear whether the PM thinks we should pay off our credit card bills or not.

We absolutely must reduce our personal indebtedness, regardless of the outcry from (Keynesian) economists’ who are terrified of a reduction in demand.

It’s terribly damaging that so many people are in so much debt. Debt reduces an individual’s freedom to innovate and take risks, which in turn, is just as damaging to an economy’s future, as any marginal reduction in demand. Fewer people willing and/or able to be entrepreneurs, is not a good thing.

See my article from 2007.

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