Skyrocketing Costs Will Pop All the Bubbles
The reckoning is coming, and everyone who counted on “eternal growth of borrowing” to stave off the reckoning is in for a big surprise.
We’ve used a simple trick to keep the status quo from imploding for the past 11 years: borrow whatever it takes to keep paying the skyrocketing costs for housing, healthcare, college, childcare, government, permanent wars and so on.
The trick has worked because central banks pushed interest rates to zero, lowering the costs of borrowing more as costs continued spiraling higher.
But that trick has been used up. The next step–negative interest rates–has failed to spark the “growth” required to pay for insanely overpriced housing, healthcare, college, childcare, government, etc.
We’ve reached the end of the line on lowering interest rates as a way of borrowing more to keep our heads above water. We’ve reached the point where households and enterprises can’t even afford the principle payments, i.e. no interest at all.
How are banks supposed to make money at zero interest rates? By charging outrageous overdraft fees and offering marginally qualified borrowers sky-high credit cards, and getting in on the federally guaranteed mortgage/student loan racket, that’s how.
The point here is the discipline of rising costs has been destroyed by easy money. Take higher education as an example. If there was no federally backed student loan “industry,” universities would have been forced to innovate 20 years ago to lower costs and improve the market value of their “product.”Instead, they left their bloated cost structure untouched as it spiraled ever higher, and simply passed the higher costs onto students, who have had to borrow over $1.5 trillion to feed the bloated higher education cartel.
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