There is no real conundrum!
You have expressed the options we have available to us.
We can save/consume, borrow/invest as we see fit.
There are obvious interlinkages and feedbacks - as you made clear.
It is a beautifully complex (but not complicated) system of actions and reactions.
Our (individual) options to save or consume relate to our (individual) views of our (shared) present and future.
These views can be aggregated into The Market, where we can act upon them.
(Unless one expects to default) no one borrows expecting the future to be worse than today.
This trade off between the present and the future is weighed against the (subjective) cost/benefits of the action we choose over that period.
All 'assets' can therefore be said to possess their own discount curves which allow the individual to arrive at his/her own decisions.
The Market therefore defines these discount/yield curves, and the interaction with participants continually changes it.
"100 Grade A apples today for 105 Grade A apples in 1 years time".
We now bring in the idea/concept of exchange of money into things, which leads to the concept of prices and forward curves for prices.
For all these feedbacks to work correctly then The Market must determine the discount curves for all assets.
However, this is not true for money, where a politburo of central bankers look into a cauldron of statistics and pull out a number for what the (time) cost of 'money' - and by extension credit - should be.
Now the 'natural' informational feedbacks of price become distorted, and so to do the time preferences of the actors - save/consume and borrow/invest.
The forward prices curves may be arbitrage-free, but they are false w.r.t. partcipant preference as the money discount curve is not market-determined and does not itself represent participant preference to save/invest or borrow/consume.
Burying whisky and gold coins will have exactly the effects you state, people will be able to react to them and buy assets (at spot or forward) where they consider them cheap and sell them (at spot or forward) where they consider them expensive.
Producers (distillers) would then be able to see forward curves of supply and demand for all assets and determine the supply and demand of plants etc.
Arbitrageurs would ensure the relationships between spot and forward prices.
The catch is that all contracts - exchanges of assets -are 'based' in terms of money, a price for which the supply and demand is not set by The Market.
Any hopes for this system to perform responsively - i.e. to be critically damped w.r.t. new information - can no longer exist.
My axiomatic view is that the over-responsive actions of the economy - booms and bust - are caused directly from the fact that The Market does not determine the time-value supply and demand curve for money.
So when one has an ever-changing reference to look at one can always find an example, or an occasion, that proves/disproves any points.
Credit growth is bad when it is not market-determined.
I.e. when the cost of credit is not determined by market action.
The 'natural' market feedbacks are suspended and we become more prone to extremes in supply and demand.
The consequences of credit growth ?
We can now find good or bad examples (consequences) depending on what we hope to prove.
We have seen the limitations of government running services like electricity, railroads etc..
For some reason we tolerate these muppets to do so for our credit system.
Our actions to save/consume, to borrow/invest, are determined by the discount curve of money.
The discount curve of money is determined by our actions to save/consume, to borrow/invest.
Our (collective) actions are not our own otherwise.
" A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army"
- TJ
-macavity
I fully expect the Fed to begin purchasing bonds issued by the US Treasury with crisp freshly-printed notes, if long term rates begin to rise.
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