Could one then argue economic growth fueled by credit may in effect be artificial in nature?
One could definitely make a strong case for this as credit markets do not always accommodate ongoing consumer and business borrowing. Unlike our former scenario where consumers spent savings derived from their wages, economies that become increasingly dependent on credit induced consumption become susceptible to adverse changes in the credit markets (higher interest rates). 8. What does this have to do with rising prices and inflation? When economic growth becomes increasingly dependent on credit, the requirement to produce first to generate earnings and savings is largely diminished. Simplistically, consumers do not need to earn the money by producing something first, they just borrow to purchase things. This can result in an increase in demand for goods and services without the required increase in productive capacity to supply them, leading to general price rises. 9. If this is the case could one not argue that inflation is not a rise in prices but an increase in the level of cheap
