Buying Now, Paying Later

http://www.nytimes.com/2015/07/09/business/economy/consumer-borrowing-hits-a-record-3-4-trillion.html?ref=topics

       The issue identified in this New York Times business briefing is that consumer borrowing has risen higher than it has been in recent years. Consumer borrowing refers to people who take out loans: money that they do not currently have, but sign a contract to return, often with interest. The reason for this increased consumer borrowing as identified by the Federal Reserve is an increase in people taking out student loans as well as car loans.

       Responses from economists to these data releases are surprising. The general consensus seems to be that it's a healthy practice. They assert that it is good for the United States economy when people are borrowing as well as spending money. They also suggest that as employment rates, which are decidedly good for the economy, providing jobs and then as a result, money, rise, consumer borrowing rates rise. By association, the rate of borrowing is declared positive.

       My question: is borrowing really as good for the economy as spending? Or, are they only good when they are connected? Loans seem like they would hold up the economy rather than allow it to be liquid. The total borrowing rate, according to the Federal Reserve, has increased to a record-breaking amount of $3.4 trillion. However, the economists quoted in the article still do not seem to be alarmed.

       I seem to remember bad housing loans as being one of the major components that pushed us into the 2008 recession. I wonder if it can be said that there is not the same risk now that people will not be able to pay the bank back for what they bought earlier with intentions to pay later.

       As long as employment rates continue to rise, and consumer spending does not waver, I don't believe that also taking out loans will be a problem. In this way, borrowing is simply another version of consumer spending and will have positive effects in keeping the economy flowing. After all, taking out loans still pays money to the companies distributing the product or service. The money usually finds its way to its rightful owner, anyway. Banks determine who they will loan to, and when they do an honest job of determining that, we have nothing to worry about.

       Indicators of a healthy economy, as expressed by this article, include a vast majority of the population hanging on to jobs in order to spend what they earn as well as to take out loans for reasons such as cars or tuition.

       A population with billions of dollars of consumer borrowing in student loans has to be successful, right? Because it is always worth it to spend thousands of dollars on a college education which will always land you a better job in life?

I sure hope so.