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Virtuous Debt

Pawnshop, 1940

Pawnshop, 1940

In the many postmortems of the Great Recession, a common diagnosis pointed to the consumerist, spendthrift, live-for-today borrowers that Americans had presumably become — and to the highly-indebted government those Americans had voted into office. The crisis revealed, some observers argued, Americans’ fall from an earlier, sober, accounts-balancing virtue. These critics, I argue in my latest Boston Review column, incorrectly explain the crisis, underestimate the importance of debt, and misremember American history. See here.

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Commentators trying to make sense of the economic chaos that hit the nation in the last couple of years have wagged their fingers in many directions – at banks, regulators, lenders, and so on.

But one culprit in everyone’s sights is the American consumer. Americans are in good measure to blame, we hear, because in the last couple of decades they became reckless spendthrifts, careening into credit-card debt, living far above their means – and then crashing and burning.

Could be. But overspending is nothing new. Indeed, it’s probably been less true recently than it used to be.

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