Pumping Up...Credit

Quite a few economists and pundits are talking about how the jobs and the economy would be galloping if only credit was easily available. The latest is a piece by Tom Friedman in the NYT - The Do-It-Yourself Economy - "The Great Inflection is the mass diffusion of low-cost, high-powered innovation technologies — from hand-held computers to Web sites that offer any imaginable service — plus cheap connectivity. They are transforming how business is done. The Great Recession you know.The “good news” is that the Great Recession is forcing companies to take advantage of the Great Inflection faster than ever, making them more innovative. The bad news is that credit markets and bank lending are still constricted, so many companies can’t fully exploit their productivity gains and spin off the new jobs we desperately need..."

Credit, at least the traditional version, is a dangerous thing. Whether a person's fortunes are up or down, credit has to be repaid- unless one goes "bank"rupt. Credit should be used for emergency purposes and only when the operating cash flow is sound and sufficient to cover the interest and principal payments FOR THE DURATION of the loan.