"Credit, the fuel that powers the economy, is becoming more scarce and expensive."

Credit expands the money supply, but does not create wealth. The real fuel is farming, mining, and production- that which adds value.

Credit allows people to buy that which is produced sooner than otherwise, but does not increase *longterm* consumption.

When people have large debt service burdens, they can't consume as much. Instead, they help enrich moneylenders, who may or may not consume the profits.

So why do people use credit? Two reasons: 1. Stupidity and 2. Inflation.

Unfortunately, most of the time it is #1 instead of #2. Sadly, attempting to explain this to someone with debt won't cure them of stupidity most of the time. It will only make them mad, and then they will go buy therapy (on credit) to cheer themselves up.

Not true. Businesses, and indivuduals, use credit to expand production. If a company decides to establish a new branch office, and create jobs for 500 people in the process, it usually borrows the money to build the new office. Even companies that are flush with money can't afford to pay for capital improvements out-of-pocket. You mentioned farms. Most farmers buy their seed on credit, then pay off the seed with the harvest. Financial people talk about good debt and bad debt. Bad debt is when you buy something you don't need on credit rather than saving up for it i.e., a flat screen TV. Good debt is when you borrow money to buy something that will pay for itself, such as when a store owner buys his stock items on credit and then resells them at a profit, paying the loan off with the profits. Bad debt needs to be curtailed. Good debt is the lifeblood of any business.

"Even companies that are flush with money can't afford to pay for capital improvements out-of-pocket."

Because their competition will borrow to get the improvements first. However... if the competition wasn't able to borrow, the companies would instead feel free to pay for capital improvements out of pocket, instead of borrowing like crazy in a minature arms race.

Credit, then, creates jobs *sooner*, but does not create MORE jobs overall. The money being paid to the lender could have went to hiring one more worker. Now, it will not.

Good debt duels with good debt until one person's good debt becomes bad debt. It's not lifeblood. it's a mouthguard and boxing gloves.

You're obviously not an economist, and you've contradicted yourself a few times in a small number of words. You're not alone in this misunderstanding of wealth though. A student in an upper-level economics class once started to explain inflation starting with "intrinsic".

When the money supply is expanded, the economy grows. The Federal Reserve System monitors and regulates growth in the money supply in an effort to grow the economy with a tolerable level of inflation. Reducing that money supply growth slows economic growth.

Counting accumulated value - denominated in money, of course, is the only way we have of measuring wealth. You could have a warehouse full of product, but if it becomes worthless through damage or obsolescence, there is no wealth there. It could cost you money to get rid of it.

Finally, your "production" standard of creating wealth leaves out services. That's a big part of the economy.

"Counting accumulated value - denominated in money, of course, is the only way we have of measuring wealth."

Aye; there's the rub! When the money is recognized to be worthless, we will no longer be able to count and will degenerate to some primitive state. Imagine not having a way of telling if you are keeping up with the Joneses or not. What a scary thought.

Money has always been worthless except as a method of exchange. It's useful because it can be used to buy things people need - like food, clothing, and shelter.

I will decline a discussion of the "value" of money with a goldbug or with anyone else who doesn't accept that basic principle. I'm not going there. Gold is one of the most useless commodities one can buy. You can't eat it, wear it, or live in it, and you have to pay someone to store it and guard it for you.

can't wear gold?? Have you ever met a woman?

"When the money supply is expanded, the economy grows."

Wrong! The money supply can be expanded without growing the economy, and, the economy can indeed grow without an expansion of money supply.

"Counting accumulated value - denominated in money, of course, is the only way we have of measuring wealth."

Also, wrong. If I own 2,000 acres of land, free and clear, I'm 2,000 acres rich, regardless of whether or not some bean counter has assigned a dollar value to my land. Also, If I am unwilling to sell, obviously my land is worth more to me than what the bean counter says. In fact, the economy is based on the fact that things are not worth the same thing to different people, thus facilitating trade.

Money is certainly convenient, but it's not the only way.

It's still a transactional thing though; the gold does not directly keep you warm. I was originally thinkiing about clothing rather than company, but if you work it out right, a nice gold ring with perhaps a big diamond in the middle could arrange for many warm nights.

Madai:

The money supply can be expanded without growing the economy, and, the economy can indeed grow without an expansion of money supply.

It's technically possible but not how things normally work - do you want to try and find some historical examples? A fairly concise (we are after all discussing economics) explanation of the relationship between money supply and economic growth is here:

<link>

Madai:

If I own 2,000 acres of land, free and clear, I'm 2,000 acres rich, regardless of whether or not some bean counter has assigned a dollar value to my land.

Like any other commodity, land value can be a subjective thing. Still, if you own land in central Iowa you are a lot better off that if you own land in central New Mexico.

Madai:

Also, If I am unwilling to sell, obviously my land is worth more to me than what the bean counter says.

Or you could be a looney standing in the way of the new freeway; the practice of property appraisal assigns a dollar value to land and improvements. It's sometimes arbitrary but it works for most purposes.