Nothing, is a powerful disciplinarian. A floor to how low you can go. Saying “spend less than you earn” seems ridiculous without the dangerous helping hand of borrowing. If we can borrow, we can borrow to spend. Interest is the salary paid to money that is borrowed. Salaries are a commitment. The wage bill comes whether or not the customers turn up. The interest is due with no concern to what was done with the money.
It is one thing to borrow money and put it to work productively. Where it creates more than the salary it is paid. There may even be a gap between when the money is earned and when the salary is paid... so the salary is an advance of expected/known/hoped-for (but distant) pay-back.
It is a completely different thing if we borrow to spend. If we sink into a swamp of debt-financed consumption. Some have no choice. They pay ridiculous interest rates (because they are “high risk”) for short term emergency loans. Ironically, the lowest salary for money gets paid to those who have the most proof they do not need the support.
Most lending is income-based. The obvious one is mortgages (3-4.5x salary) where you borrow a multiple of your formal income (the lender is trusting the employer’s commitment). Then people end up borrowing as much as they can to buy as big a house as they can. The demand goes up. The prices go up... not because of value creation, but because of the hot air.
