Credit creation

Senator Jim Bunning's action is interesting. His motives for the bill blockage may be many but his blocking of the bill is trying to withhold unemployment payments to the unemployed plus a few other payments like to transportation workers. We are trying to create more credit in the economy and should we then block these govt payments? These govt payments may not be paid for but that is just accounting. Modern economy thrives on credit creation - it can't deal with deflation. A hundred years back,, a person has to save the full amount to say buy a house. With modern economics, we don't want the person to save for a lifetime to buy a house. That person will be able to provide services to the economy over time and the person should be given a credit to borrow on the future value of his services. This increases the level of transactions between people in an economy. We may measure GDP of an economy in terms of monetary value but that monetary value is a measurement of the exchange of goods and services happening in an economy. As we increase the speed of this exchange, the economy will thrive. But people won't exchange unless they feel they are getting value in this exchange. A fruit grower is not going to exchange more fruits for another ipod if he already owns a number of ipod. He will be willing to exchange it for an iphone as it provides more value to him compared to the ipod. Coming back, credit creation is geared towards increasing the exchange of goods and services within an economy. If credit creation is done at a rate that is excessive, it will lead to inflation - basically increases the nominal amount of an exchange without leading to higher exchange activity. Credit creation will be excessive if credit is given to people in excess of the future value of their services rendered to the economy. With new businesses, one doesn't know the value of the service that will be created and so it is difficult to judge if the given credit is excessive or not. but with mortgage lending, if it is given to people without any verification of salary (which could be used to measure the long-term value of the person's services), you could easily get into an excessive credit situation.