Why is this such a horrible thing though? Obviously, less lending is bad for the banks, but I fail to see how it would be bad for the consumer if they actually saved up money and paid cash for a car. Although I do understand why lending is important for starting a business; it would be hard in many markets to save enough capital to get off the ground. I'm talking about small stuff, like housing, cars, TVs.
I have little to no economics knowledge, but it does seem to me that this pervasive, cultural thinking that we need this now is the source of many problems. I know some retailers like Ford even attempted to curb the practice of buying on credit, but ultimately caved to pressure from customers wanting to live above their means.
So, can you explain, in a way that doesn't involve trickle-down economics, how borrowing money is a net gain for consumers? (I'm genuinely not being snarky here, just curious.)
Getting credit solves cashflow problems. If you're spending $10/week at the laundry, buying a $250 washing machine pays for itself very quickly. Except you can't save $250 because you keep needing to do laundry.
If you can make $1000 more per month at a job that's inaccessible to you via transit, but you don't have $10,000 to buy a car, it would be worth it to get a loan with a $300/month payment, and say another $300/month worth of car-related expenses to net out $400/month income that can be used for saving up for that TV or what-have-you.
In terms of items that retain their value, like houses, apartment buildings, factories... no one would be wise to invest in those items in a deflationary environment because if you're interested in growing your net worth, you'd be better off keeping your money in the bank.
Its not generally bad for consumers qua consumers (though there are ways that it can be, because it prevents large purchases that save in the long term), but its bad for the same people that are consumers as laborers because less borrowing by business and less investment in business (both effects of deflation) mean less paid work available, and less utility produced regardless of the distribution.
> So, can you explain, in a way that doesn't involve trickle-down economics, how borrowing money is a net gain for consumers?
It enables you to do things like buy a car to go to work at a job that pays well before you have amassed sufficient retained income from that job to pay for the car. Without the ability to borrow money, you may not be able to take (or, if you take it, keep) the job because you can't get to it.
While this is unfortunate, I see it as garbage collection for the economy. Once completed, there are new resources ready to go for the next phase of growth. If there is a deleveraging and saving phase, that provides the capital base for the next growth event. Keeping old processes running forever out of fear of a reboot is worse for the long term. Incentivising bad decisions during boom times with a Greenspan put creates moral hazard.
Our economy relies on inflation to make it work. A lot of the persistent sluggishness of the current economy is due to the remarkably low inflation, meaning that all the debt people built up prior to the crisis in 2008 is still hanging around and will be for years to come. People are stuck under student loans and underwater mortgages, and unable to invest in their own future. With stagnant wages, digging out from under the debt will take a long time, and until that happens, the economy will continue to trudge along.