Consumer Debt and Inflation

In a market-clearing economy, declines in demand from one sector do not cause large declines in aggregate output because other sectors expand. The key price mediating the response is the interest rate. A decline in the rate stimulates all categories of spending. But in a low-inflation economy, the room for a decline in the rate is small, because of the notorious lower limit of zero on the nominal interest rate. In the Great Depression, substantial deflation caused the real interest rate to reach high levels. In the Great Slump that began at the end of 2007, low inflation resulted in an only slightly negative real rate when full employment called for a much lower real rate because of declines in demand. Fortunately, the inflation rate hardly responded to conditions in product and labor markets, else deflation might have occurred, with an even higher real interest rate. I concentrate on three closely related sources of declines in demand: the buildup of excess stocks of housing and consumer durables, the corresponding expansion of consumer debt that financed the buildup, and financial frictions that resulted from the decline in real-estate prices. (JEL E23, E24, E31, E32, E65)

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Patterns and evolution of consumer debt: evidence from latent transition models

Quality & Quantity ◽

10.1007/s11135-018-0759-9 ◽

2018 ◽

Vol 53 (1) ◽

pp. 389-415 ◽

Cited By ~ 3

Author(s):

Piotr Białowolski

Keyword(s):

Consumer Debt ◽

Latent Transition ◽

Transition Models

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Embodied Neoliberalism: Epidemiology and the Lived Experience of Consumer Debt

International Journal of Health Services ◽

10.1177/0020731418776580 ◽

2018 ◽

Vol 48 (3) ◽

pp. 495-511 ◽

Cited By ~ 3

Author(s):

Elizabeth Sweet ◽

L. Zachary DuBois ◽

Flavia Stanley

Keyword(s):

Lived Experience ◽

Personal Responsibility ◽

Epidemiological Data ◽

Consumer Debt ◽

Debt Burden ◽

Physical Health Outcomes ◽

Data Links ◽

Open Questions ◽

Socioeconomic Determinant ◽

Neoliberal Ideology

A growing set of epidemiological data links personal financial debt to negative mental and physical health outcomes. These findings point to debt as a potentially significant socioeconomic determinant of population health, especially given rising rates of household and consumer debt in industrialized nations. However, the political and economic contexts in which rising consumer debt is embedded and the ways in which it is experienced in everyday life are underexplored in this epidemiological literature. This gap leaves open questions about how best to situate and understand debt as a health determinant with both psychosocial and neo-material attributes. In this article, we discuss findings from a qualitative study of personal debt experience in Boston, Massachusetts. Participants’ debt narratives highlight the powerful feelings of shame, guilt, and personal responsibility that debt engenders. The findings point to the influence of neoliberal ideology in shaping emotional responses to debt and suggest that these responses may be important pathways through which debt affects health. We discuss our findings within the broader landscape of American neoliberal economic policy and its role in shaping trends of consumer debt burden.

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