Our obsession with debt

I have often wondered why the United States Government encourages debt and consumption rather than savings and investment. The following article by Robert P. Murphy of the Mises Institute explores the basis of this paradox:

http://mises.org/daily/4631

The following 2 quotations that are referenced in the above article drive home Robert Murphy’s point:

Marriner Eccles was the Governor of the Federal Reserve System in 1941. On September 30 of that year, Eccles was asked to give testimony before the House Committee on Banking and Currency. The purpose of the hearing was to obtain information regarding the role of the Federal Reserve in creating conditions that led to the depression of the 1930s. Congressman Wright Patman, who was Chairman of that committee, asked how the Federal Reserve got the money to purchase two billion dollars worth of government bonds in 1933. This is the exchange that followed.


ECCLES: We created it.

PATMAN: Out of what?

ECCLES: Out of the right to issue credit money.

PATMAN: And there is nothing behind it, is there, except our government's credit?

ECCLES: That is what our money system is. If there were no debts in our money system, there wouldn't be any money.

Robert Hemphill, Credit Manager of the Federal Reserve Bank in Atlanta, wrote in 1936, "If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible — but there it is."