Publication Date: January 31, 2014
This paper was prepared for the Markle Economic Future Initiative.
Personal debt has always existed in the American economy, but it hasn’t always been a way to make profits. The business of America was in making things, not in financing consumption. Lending, especially at the retail level, was small-scale and unprofitable. Stores lent money to their customers as a way to grow their business, profiting on the merchandizing but not on the loans. Manufacturers did not concern themselves with lending to customers because there was so much profit to be had in making things. Today, however, securitization has made consumer debt an easy, safe, and profitable alternative—for both corporations and banks–to investing in businesses. As consumer debt has become a profitable site of investment, it has displaced investment in real economic growth.
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