The title of this post is a quote from one MCK on the Free Exchange in an article entitled “Scott Sumner is Wrong.”

I am sort of lost on what a “deeply destructive debt bubble” really is. Instead of telling us whether it is bigger than a breadbasket or smaller than a pea, he must just assume we get the idea of what a debt bubble is when he tells us that we can recognize one when “people are using their homes as ATM machines.”

Oh, those recklessly foolish people! How dare they spend their money how they wish!

Doesn’t it sound a bit self-righteous and what else? Oh yeah… Paternalistic. Not to mention that in the 1930s, the last time NGDP took a tumble off a pier as it did in 2008, judgmental imbeciles, while engaging in religious rituals to please the gods of the golden metal, said the same things about people who lost their jobs, their homes and families as a massive vortex of monetary deflation swallowed up everything that was good and green in this world.

As I was attempting to read this article, visions of other articles I have read that explain that the holders of the majority of wealth in other countries seem poor because they have little access to liquidity flashed through my mind. Many of these articles, I will have to dig a few up, praise the financial mechanisms in the developed world that allow for average people to turn dreams of entrepreneurship into reality, specifically by providing liquidity in the home equity markets.

But here, this is a very terrible thing. We simply cannot have any of it. They might just blow all that money on ski trips, cars, and only God knows what else. We just can’t trust them with money; so they can’t have it!

Perhaps MCK believes a world where government bureaucrats decide who can take out a loan for which purpose is a better idea. He couldn’t possibly mean that he wants what would accompany the drying up of liquidity in credit markets – returning to 3rd world status where the holders of the majority of the wealth cannot use it for anything productive. I think it’s a pretty fair assumption to make that he indeed means this if we are expected to buy into the scare tactics of big government conservatives and acknowledge such a thing as a “deeply destructive debt bubble” actually exists without being told what it is.

The only thing that looks like the massive bursting of a debt bubble is ultra-tight money. The only thing that makes it look like people borrowed too much, more than they could repay is plunging NGDP that isn’t made up by the central bank. Of course they cannot pay if the Fed puts a tunicate on nominal income – MV=PY.

I probably need to apologize in advance, or maybe not; but I just don’t see how any of this assumption fits with any macroeconomic models that are taught in basic macro. Ultra-tight money makes many victims; and we really should stop trying to shift blame from the technocratic tyrants who did it onto the people who lost everything they worked for all their lives in the tight money crash of 2008. They have been victimized quite enough and don’t need any more from the likes of MCK.

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