Living in a Free-Lunch World
March 28, 2015
“Everyone is a prisoner of his own experiences. No one can eliminate prejudices – just recognize them.”
– Edward R. Murrow, US broadcast journalist & newscaster (1908 – 1965), television broadcast, December 31, 1955
“High debt levels, whether in the public or private sector, have historically placed a drag on growth and raised the risk of financial crises that spark deep economic recessions.”
– The McKinsey Institute, “Debt and (not much) Deleveraging”
The world has been on a debt binge, increasing total global debt more in the last seven years following the financial crisis than in the remarkable global boom of the previous seven years (2000-2007)! This explosion of debt has occurred in all 22 “advanced” economies, often increasing the debt level by more than 50% of GDP. Consumer debt has increased in all but four countries: the US, the UK, Spain, and Ireland (what these four have in common: housing bubbles). Alarmingly, China’s debt has quadrupled since 2007. The recent report from the McKinsey Institute, cited above, says that six countries have reached levels of unsustainable debt that will require nonconventional methods to reduce it (methods otherwise known as defaulting, monetization; whatever you want to call those measures, they amount to real pain for the debtors, who are in many cases those least able to bear that pain). It’s not just Greece anymore. Quoting from the report:
Seven years after the bursting of a global credit bubble resulted in the worst...