If people keep borrowing everything will be alright? Society, the economy, doesn’t work that way.
The economic good times are when confidence, trust, risk taking are all high. That music stops when people lose confidence, the Great Financial Crisis, just like all recessions are fundamentally a loss of confidence. This causes people with funds to claw them back, and retreat into their castle, and wait for the bad times to blow over. This is what happens when the economy collapses. When prices and asset liquidity crash. When rates go up. When you can’t borrow anymore and when you have to pay back the money you are borrowing, because it’s in the fine print that they can ask for it back whenever they like. Then inflation goes up. Borrowing rates go up. Asset prices go up, unless no-one has confidence in that particular asset (eg stocks or property where those companies are based).
Consumer leverage is not a bulwark against recession.
The economic good times are when confidence, trust, risk taking are all high. That music stops when people lose confidence, the Great Financial Crisis, just like all recessions are fundamentally a loss of confidence. This causes people with funds to claw them back, and retreat into their castle, and wait for the bad times to blow over. This is what happens when the economy collapses. When prices and asset liquidity crash. When rates go up. When you can’t borrow anymore and when you have to pay back the money you are borrowing, because it’s in the fine print that they can ask for it back whenever they like. Then inflation goes up. Borrowing rates go up. Asset prices go up, unless no-one has confidence in that particular asset (eg stocks or property where those companies are based).
Consumer leverage is not a bulwark against recession.