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138 Years of Economic History Show that It's Excessive PRIVATE Debt Which Causes Depressions

George Washington's picture




 

Preface:  We like to debunk myths held by both the left and the right.

For example, we have repeatedly argued that government debt and deficits do matter. Over a certain level, they form a large drag on the economy. That pisses off our liberal readers.

But we keep pointing out that – instead of imposing draconian austerity – it would be much better for the economy to stop handouts to the big banks, stop getting into imperial military adventures and stop incurring unnecessary interest costs (and see this). That infuriates our conservative readers.

This post, however, focuses on private rather than public debt.  Prepare to be offended … and lock up your sacred cows before we find and slaughter them.

The National Bureau of Economic Research has published a new paper analyzing 138 years of economic history in 14 advanced economies, which proves that high levels of private debt cause severe recessions.

As summarized by Business Insider:

Through a series of tests run on a sample of 14 advanced economies between 1870 and 2008, Mr Taylor establishes a link between the growth of private sector credit and the likelihood of financial crisis. The link between crisis and credit [i.e. private debt] is stronger than between crises and growth in the broad money supply, the current account deficit, or an increase in public debt.

 

Over the 138-year timeframe Mr Taylor finds crisis preceded by the development of excess credit, as in Ireland and Spain today, are more common than crisis underpinned by excessive government borrowing, like in Greece. Fiscal strains in themselves do not tend to result in financial crisis.

The study shows that excessive private debt is a much more accurate and consistent predictor of financial crisis than the amount of public debt. (However, high levels of public debt exacerbate the problems caused by massive private debt, since governments which are already “in the red” have little ammunition left with which to help out the economy.)

The NBER study validates what Steve Keen has been saying for years: excess private sector debt is the main driver of deep recessions and depressions. And yet Ben Bernanke and all other mainstream economists literally believe that the amount of private debt doesn’t matter and isn’t even important to quantify.

As Michael Clark notes, high levels of public debt are detrimental … but it is high levels of public debt which initiate depressions:

American Private Debt [was] 310% of Gross Domestic Product in 2008, the highest since 1929, the last Great Depression, when Private Debt was 240% of GDP.

 

***

 

Government debt in 1929 was a paltry 40% of GDP. In 1945, when America was financing its participation in World War II, government debt exploded to 120% of GDP. That is the highest government debt has been in America, making the 85% of GDP in 2011 seem almost insignificant.

 

***

 

Government debt vis-a-vis Gross Domestic Product is not astronomical, according to this chart. It was not high in 1929 either, the last time the global economy had a heart attack and died. Public Debt is, in fact, at the time of this chart at least, lower than in 1945, when the public financed American involvement in World War II.

 

***

 

There WAS a Real Estate/Housing Bubble and subsequent banking crisis in the 1920′s. In fact, the asset bubble that began in 1921 helped to cause the massive PRIVATE DEBT BUBBLE that destroyed the global economy then also. The web site below examines the housing bubble of 1921-1926.

 

www.library.hbs.edu/hc/crises/forgotten.html

 

The famous stock market bubble of 1925-1929 has been closely analyzed. Less well known, and far less well documented, is the nationwide real estate bubble that began around 1921 and deflated around 1926. In the midst of our current subprime mortgage collapse, economists and historians interested in the role of real estate markets in past financial crises are reexamining the relationship of the first asset-price bubble of the 1920s with the later stock market bubble and the Great Depression that followed….

 

What this all suggests is that American Big Business (Wall Street and Wall Street’s political lackeys in Washington) is refusing to take the blame for the Global Collapse it helped to create through the same mechanism it used in the 1920s, Private Greed, pursuing recklessly their own economic empires — asset price inflation fueled by lower and lower interest rates – and has attempted to shift the blame on to the governments of the world ….

The debt that must be destroyed before the global economy can reach a state of organic growth again is, primarily, Private Debt — private enterprise debt and private consumer debt….

 

Of course, Big Business has now found a convenient method for unloading toxic debt: by selling it at face value or even at future inflated value to the governments of the world. The governments are willing to buy worthless private debt in the hope of keeping themselves in power, of keeping their societies from unraveling into civil war and revolution. Why would Big Business ever concern itself with risk if there will always be a buyer of last resort willing to absorb the crimes and failures of the Free Market in pursuing the demon of Unlimited Wealth?

 

Then, of course, this forced ingestion of toxic (criminal?) debt by the governments in question — in hopes of avoiding civil war — has been followed by the political gambit of Big Business and the political supporters of Big Business screaming and shaking of fists at the government for taking on too much debt. Well, the ‘too much debt’ the public was taking on was the Disaster Debt of unregulated Big Business which made careless business decisions without considering risk or even to crimes in many cases (organized crime almost certainly, organized crimes in white shirts on Wall Street).

Clark notes that the same is true in Europe:

428250 13366500010968645 Michael Clark 138 Years of Economic History Show that Its Excessive PRIVATE Debt Which Causes Depressions

***

 

According to Paul De Grauwe, writing in the web-page below, only Greece, Italy and Belgium have government debt over 100% of GDP.

 

www.voxeu.org/index.php?q=node/5062

 

In fact, Spain and Ireland had very little government debt when the global economy sank in 2008. But they had huge levels of Private Debt, all connected to the Housing Bubbles out of which they were just emerging. Spanish government debt was less than 40% of GDP until the Titanic struck the ice. Ireland’s Public Debt was a fraction over 20%.

 

France (socialist France) had Public Debt that was only 45% of GDP.

 

***

 

Those who say that it is government profligacy that is the source of the debt crisis are mistaken. They also fail to see the inevitable connection between private and public debt. This connection is particularly strong in countries like Spain and Ireland that have been hit badly by the debt crisis.

 

***

 

Spain and Ireland were spectacularly successful in reducing their government debt to GDP ratios prior to the financial crisis, i.e. Spain from 60% to 40% and Ireland from 43% to 23%. These were the two countries, which followed the rules of the Stability and Growth Pact better than any other country – certainly better than Germany that allowed its government debt ratio to increase before 2007. Yet the two countries, which followed the fire code regulations most scrupulously, were hit by the fire, because they failed to contain domestic private debt.

 

So, what happened to us? Why did we crash? We crashed because businesses and individual consumers (Wall Street and Main Street) over-leveraged in an attempt to reap dream-like profits on the Housing Bubble, both as credits and as debtors. This feeding frenzy — encouraged by the Fed and the banks — it is an illusion that the Fed Chairman is not the pet figurehead of the banking establishment — destroyed our economy and is sending us into decades of pain.

 

***

 

Now — as Japan did — we are attempting to pare down Private Debt by handouts and bailouts and by the government buying toxic assets of the guilty parties — that is, to turn Private Debt into Public Debt [background], while we try to preserve the status quo, keep Old Money in Power, and avoid civil war — i.e., spending billions to try to keep asset prices elevated [background], and voters/citizens soporific.

 

There is a moral element that we should not miss: giving public money to the fools and crooks that destroyed the economy through greed and self-interest so they can try to do it again — the idea that Ben Bernanke would squat on interest rates so that he could feed money to reckless billionaires at the expense of retirees and savers is appalling.

(Indeed … see this, this and this.)

Financial Sector Debt Is a Bigger Problem than Consumer Debt

As Anthony Randazza notes, Americans started to reduce their debt and deleverage at the start of the financial crisis … but have slid backwards again in the last couple of years:

America had started the process of household balance sheet deleveraging after the bubble burst. Mortgage debt levels have fallen sharply. And consumer credit—all debt other than mortgage debt—was declining as well. But in the summer of 2010, as the post-recession faux-recovery created false hope that the good times were back and as savings decimated by the bursting bubble began to hit zero in the midst of a weak economy, consumer credit levels (led by credit card purchases) began to rise again.

 

The figure below shows that consumer credit fell 7.1 percent from June 2008 to June 2010, but since then has grown 6.9 percent to June 2012 (according to data released this month by the Fed).

 

 138 Years of Economic History Show that Its Excessive PRIVATE Debt Which Causes Depressions

 

This is indeed troubling.

But as we’ve previously documented, it is financial company debt – i.e. leverage – which is the main problem (and see this and this).

As Keen notes:

Figure 5: Separating out private sector and public sector debt in the USA

121911 0526 Movementatt5 138 Years of Economic History Show that Its Excessive PRIVATE Debt Which Causes Depressions

 

This is more apparent when we look just at the change in debt: private and public debt move in opposite directions.

Figure 6: Private and public debt move in opposite directions

121911 0526 Movementatt6 138 Years of Economic History Show that Its Excessive PRIVATE Debt Which Causes Depressions

Finance sector debt matters

 

Ignoring finance sector debt is a mistake. Firstly, it’s huge: by far the largest component of debt, private or public, in the USA (see Figure 7).

Figure 7

121911 0526 Movementatt7 138 Years of Economic History Show that Its Excessive PRIVATE Debt Which Causes Depressions

 

Secondly, finance sector debt is not a “zero sum game”. Though lending by a non-bank financial company to another entity doesn’t create money, it does create debt; and the initial lending by a bank to a non-bank creates both credit money and debt. Since the finance sector was the source of most of the speculative debt that fuelled the bubble, and it is by far the major force in deleveraging now, leaving it out of the analysis exempts a major causal factor in both the pre-2008 boom and the post-2008 debacle.

Angry Bear writes:

[Consumers certainly rang up too much debt.] But that ignores the really massive runup: financial corporations’ debts. Starting at a little over 10% of GDP in 1970, they hit almost 80% by 2000, and when the crash hit they were over 120% of GDP — a 10x, order-of-magnitude increase over 40 years.

 

***

 

The basic story is very simple. It goes like this (in my words):

 

• Banks (and shadow banks) make money by lending. Bankers have every incentive to increase their loan books, even by extending questionable loans, because bankers don’t personally bear the eventual, down-the-road losses from loan defaults — they’ve gotten their money already.

 

• When banks run out of real, productive enterprises to lend to — enterprises that can pay back loans and interest from the production and sale of real goods that humans can consume — they start lending to speculators (gamblers) who are buying financial assets in hopes that their prices will rise.

 

• That lending — extra money being pumped into the system — does indeed drive up the price of financial assets, far beyond the value of the real assets that (according to most economists you listen to) supposedly underpin those financial assets’ value.

 

• Eventually people realize that the value of financial assets far exceeds the value of real assets — and far exceeds the capacity of the real economy to service the loans that drove up those financial asset prices. Prices of financial assets plummet, borrowers default because there just ain’t enough real income to service the loans, financial-asset prices plummet some more, all in a downward spiral — with all sorts of collateral damage to the real economy.

 

There’s your (economy-wide) Ponzi scheme. Households and nonfinancial businesses definitely participate (the financial industry makes it almost irresistible not to), but it’s driven by the financial industry, and a huge proportion of the takings go to players in the financial industry.

And Michael Clark notes:

428250 13366513448321958 Michael Clark 138 Years of Economic History Show that Its Excessive PRIVATE Debt Which Causes Depressions***

 

While the government debt ratio in the Eurozone declined from 72% in 1999 to 67% in 2007) the household debt increased from 52% to 70% of GDP during the same period. Financial institutions increased their debt from less than 200% of GDP to more than 250%.

What’s the Solution?

We are in a bit of a pickle.

As Keen warns:

[We’re going into] a never-ending depression unless we repudiate the debt, which never should have been extended in the first place.

What’s the solution?

To remember history.

Specifically, we’ve known for over 4,000 years that debts need to be periodically written down, or the entire economy will collapse.

The ancient Sumerians and Babylonians, the early Jews and Christians, the Founding Fathers of the United States and others throughout history knew that private debts had to be periodically forgiven.

Debt jubilees are a vital part of the Christian and Jewish faiths. And the first recorded word for “freedom” anywhere in the world meant “debt-freedom”.

As some of the leading modern economists argue, forcing big banks, bondholders and other creditors to write down some of their bad debts is the only way out of our economic malaise.

Note:  If you want to know learn about Minsky’s economics, read Steve Keen, not faux Minskyians.

 

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Fri, 09/14/2012 - 20:57 | 2797707 Vinnie
Vinnie's picture

Guys, why should debt jubilee be enough? Has it worked for 4.000 years, if different generations need to repeat it time and time again? Isn't this like scooping water from a leaking boat without trying to fill up the hole? At least is seems to me my one year old daughter will be having to dealing with her own crisis herself, if we choose to go this way.

All money is created out of debt. Debt bears higher interest than money (deposits). Therefore, debt levels are destined to rise slowly over time, given that the financial sector will not write off/depreciate too much claims (they are incentivised so), as debt level will rise faster than money level in the economy. Why not look into longer term solutions such as full reserve banking, where money is issued without debt of the same level being issued at the same time?

http://en.wikipedia.org/wiki/A_Program_for_Monetary_Reform#A_Program_for_Monetary_Reform

http://www.positivemoney.org.uk/

http://www.monetary.org/

Wed, 10/17/2012 - 03:52 | 2897458 Observer
Observer's picture

I agree but we have a gold standard, the price of gold in paper currency is that standard and we can still acquire it in the open market in quantities we can afford if purchased regularly rather than in bulk

Mon, 09/10/2012 - 15:56 | 2779558 taeonu
taeonu's picture

Private borrowers don't have an unlimited credit line like the US government and eventually they hit a ceiling and can't borrow more to pay off their old debts and have to spend money they would otherwise use on goods and services to pay off their loans.  The banks never cut off the money supply to the government like they do with private borrowers.  The reason private debt rises before depressions is that the money supply is expanded and then quickly contracted by the private banks.  The banks then collect the real assests that the private borrowers pledged as collateral.  


--------

"The new law [The Federal Reserve Act] will create inflation whenever the trusts want inflation. From now on, depressions will be scientifically created.” 


"The present panic is the first scientifically created one, worked out as we figure a mathematical equation.” 


– Congressman Charles Lindbergh

--------

“Whoever controls the volume of money in our country is absolute master of all industry and commerce…and when you realize that the entire system is very easily controlled, one way or another, by few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”


– President James Garfield 

Mon, 09/10/2012 - 16:06 | 2779624 taeonu
taeonu's picture

“On September 1st, 1894, we will not renew our loans under any consideration. On September 1st, we will demand our money. We will foreclose and become mortgagees in possession. We can take two-thirds of the farms west of the Mississippi as well, at our own price…Then the farmers will become tenants, as in England.”

– 1891 American Bankers Association Memo, recorded as testimony in the Congressional Record, April 29th, 1913

Mon, 09/10/2012 - 16:02 | 2779599 taeonu
taeonu's picture

“To cause high prices all the Federal Reserve Board will do will be to lower the rediscount rate producing an expansion of credit and rising stock market, then when business men are adjusted to these conditions, it can check prosperity in mid career by raising the rate of interest. It can cause the pendulum of a rising and falling market to swing gently back and forth by slight changes in the discount rate, or cause violent fluctuations by greater rate variation and in either case, it will possess inside information as to financial conditions and advanced knowledge of the coming change, either up or down. This is the strangest and most dangerous advantage ever placed in the hands of a special privilege class by any government that ever existed. The system is private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other peoples’ money. They know in advance when to create panics to their advantage, and they also know when to stop panic. Inflation and deflation work equally well for them when they control finance.”

– Rep. Charles Lindbergh Sr. (R. MN), 1914

Mon, 09/10/2012 - 09:54 | 2778166 JohnF
JohnF's picture

Consider this as well: it's not just the level of debt, or its ratio, but more fundamentally the misallocation of capital that screws everything up. Everyone misreading the same indicators because the government is dicking around with something or other to ensure that their cronies can make a fast buck and some cohort of voters get the promised manna from heaven.

It always ends in tears because too many people want to make a fast buck and believe the bubble makers, merrily misallocating their capital until the cows come home and everyone realizes that fortuns were only made by a few. Misallocation of capital is the cardinal sin of macroeconomics and is the one thing that any good macroeconomist should be warning about. The problem, of course, is that there are so few good macroeconomists...

Mon, 09/10/2012 - 08:46 | 2777978 AynRandFan
AynRandFan's picture

The private debt that exploded into a bubble was all underwritten by Fannie and Freddie.  In other words, government caused the excessive buildup of private debt by guaranteeing it. 

"Imperial military adventures"?  Right out of the progressive dictionary.  Gee, try being impartial when writing an article that touts its impartiality.  I don't quite recall that our retaliation against Afghanistan was an "imperial military adventure", for one.

Mon, 09/10/2012 - 16:17 | 2779681 taeonu
taeonu's picture

The right likes to blame Government, the left likes to blame Corporations.

Corporate controlled State = Fascism.
State Controlled Capitalism also = Fascism.

The merger of corporate and state powers is called FASCISM.

http://www.youtube.com/watch?v=vFlKJmE4gVE

“Fascism should rightly be called Corporatism, as it is the merger of corporate and government power.” Benito Mussolini

You can argue this from the left or from the right. It's the same argument. It's called divide and conquer.

Obama's cabinet is? Wall Street insiders.
See Here: http://www.globalresearch.ca/index.php?context=va&aid=13208

Bush's cabinet was Big Oil executives.
See Here: http://entertainment.salon.com/2001/11/19/bush_oil/

"..government caused the excessive buildup of private debt by guaranteeing it." Who is the government again? The banksters caused the excessive buildup of private debt by guaranteeing it with taxpayer funds during their term as the "government".

Mon, 09/10/2012 - 21:33 | 2780499 Clashfan
Clashfan's picture

Too true. The piece totally misses the revolving door.

Mon, 09/10/2012 - 16:11 | 2779637 taeonu
taeonu's picture

Former CEO of Fannie Mae was a former board member of Goldman Sachs. Coincidence?

James A. Johnson (born December 24, 1943) is a United States Democratic Party political figure, and the former CEO of Fannie Mae. 

Johnson has been a board member of Goldman Sachs, Gannett Company, Inc., KB Home, Target Corporation, Temple-Inland, and a former director of UnitedHealth Group.

Johnson has also served as chairman of both the Kennedy Center for the Arts (1996–2004) and the Brookings Institution (1994–2003). He is also a member of the American Academy of Arts and Sciences, the American Friends of Bilderberg, the Council on Foreign Relations, and the Trilateral Commission.

http://en.wikipedia.org/wi ki/James_A._Johnson_(busin essman)#Other_memberships
- Goldman Sachs: an investment bank

- Gannet Company: an international news media company

- KB Homes: a home builder

- Target: a home furnisher

- Temple-Inland: a diversified group of companies, active in corrugated packaging, forest products, real estate and financial services

- United Health Group: an insurance company

- Kennedy Center for the Arts (1996–2004) Brookings Institution (1994–2003) American Academy of Arts and Sciences American Friends of Bilderberg Council on Foreign Relations Trilateral Commission. Think tanks that advise the "government" on policy decisions.

Mon, 09/10/2012 - 13:04 | 2778871 Clashfan
Clashfan's picture

"Retailiation against Afghanistan?" For what?

This is why 911 truth needs to be spread far and wide.

These wars are nothing less than naked imperialism.

Mon, 09/10/2012 - 08:31 | 2777941 midtowng
midtowng's picture

As usual, this is a well-researched article.

Mon, 09/10/2012 - 08:07 | 2777898 Fix It Again Timmy
Fix It Again Timmy's picture

Knocking down revolving credit rates to 3% would help, but good luck with that.  Also, even if your home is paid for, because of property taxes you are in effect renting it from the government.  Under a system of oppressive taxation, you own nothing - the state does...

 

Mon, 09/10/2012 - 07:38 | 2777862 JOYFUL
JOYFUL's picture

...it would be much better for the economy to stop handouts to the big banks, stop getting into imperial military adventures and stop incurring unnecessary interest costs (and see this). That infuriates our conservative readers...

final proof[if any was needed] that GW is either a) a moron\unlikely imo\ or....

b) a shill of the moneypower overtaxed by this assignment of trying to inveigle honest readers into the BIG TENT of dead end 'protest without purpose', so as to sideline as many potential problem peeple as possible in the run up to the final fantasy [s]election farce for his boy Ken  yatta yatta .

George, yu haven't the fuzziest idea of what 'conservative' readers might think...

suggestion box: avoid embarrassment by not straying outside yur playpen.


Mon, 09/10/2012 - 07:38 | 2777861 Bagbalm
Bagbalm's picture

How can you even distinguish between private and public debt anymore?

Contracts and law mean nothing and there is no division now. Who, if anyone, holds your debt may change on an executive whim.

Mon, 09/10/2012 - 06:22 | 2777812 redd_green
redd_green's picture

The article's debt-to-GDP graphs are meaningless.  Does anyone believe that the formulas used to calculate the GDP have not been fudged and tweaked to make it look better since Carter?    ANyone? 

The truth is: during the period from about 1997 through 2012, people who really run the US watched the closing of 50,000 manufacturing facilities, and the loss of tens of millions of manufacturing, engineering, management and R&D jobs.  Now I ask you, reasonable, smart ZH reader:  how the hell could the US claim a positive GDP growth during that period?  

If you follow that line of argument, and follow calculations by, for example, John Williams at http://www.shadowstats.com/alternate_data/gross-domestic-product-charts, then you'll throw out GDP to anything graphs and start looking at the only meaningful comparison of debt:  debt to next tax revenue.    Since net tax revenue is negative, you'll see we're in far worse trouble than the Reaganesque "debt to GDP" graphs are telling us.

Mon, 09/10/2012 - 08:48 | 2777982 AynRandFan
AynRandFan's picture

Add in the unfunded liabilities of Medicaid and Medicare and the debt/GDP of the U.S. is way over 100% and higher than WWII.  Oops, another intentionally omitted fact.

Mon, 09/10/2012 - 06:12 | 2777811 redd_green
redd_green's picture

Debt doesn't cause depressions.   Contraction of the money supply does.   There's not much more to it.

 

Mon, 09/10/2012 - 04:05 | 2777769 icanhasbailout
icanhasbailout's picture

public debt may not cause depressions, but it does destroy currencies

Mon, 09/10/2012 - 05:35 | 2777800 AldousHuxley
AldousHuxley's picture

then what causes private debt?

 

 

government kicking the can down the road with lower interest rates (risk subsidies) while masses think short term and continue to waste resources.

Mon, 09/10/2012 - 18:03 | 2779970 moneymutt
moneymutt's picture

read Steve Keen for a good answer to your question, it is private lending by banks. Private bank lending creates money. If I lent you $10 it would have to come from my savings, but banks lend money they dont have. If you ask them for $100, all they have to have at the most is $10 (it reality it is far less). In fact, lending is done first and reserves lag. So basically, the banks lend all they want, if they think you are worth the risk, regardless of their reserves. This creates most of the money in our system.

Counter to many folks who say fractional reserve lending is a ponzi scheme that the interest can never be paid back, Keen indicates private lending, when not carried away in speculative financialization, can be positive creater of money supply that can create enough economic activity and new money to easily pay interest on the bank lending.

The problem is that massive private debt creation often happens in bubbles where the money lent does not create a positive income stream from which to pay it, and interest, back but rather simply relies/hopes the appreciate of an asset will yield the income needed to pay back loan. It could be stock market bought on leverare or real estate. Govt and regulators get carried away in bubble also, but Wall Street package subprime loans didnt do it because they thought some poor workign class guy could pay them back but rather because they thought house prices would forever go up, so even if loser they lent to couldnt pay them, asset price rise would cover them, as it did for several years, til eveyone one wantged more crap MBS from Wall Street. So both private and public folks go nuts in a bubble, but private debt is primary funder of speculative bubbles.

Once private debt peaks, banks get nervous about defaults, money supply comes crashing down, creating recessions and depressions. Private debt created by private lending is the money supply. Even governemtn hating libertarians like Michael Shedlock (MISH) admit that the FED can not out spend the collapse of private debt and thus correctly predicted deflation back in sprin 2008 when everyone else was freaked about hyperinflation.

The US had plenty of bank fueled boom busts long before it had the FED and long before govt was spending much on defense, social safety net, see late 1800s. These cycles were fueled by private lending.

Mon, 09/10/2012 - 02:46 | 2777714 Audacity17
Audacity17's picture

Why are we distinguishing between private and public debt?  If the people elect representatives who run deficits...they owe that money in future taxes!  Further, it is likely that if people can't manage their own finances, they are more likely to elect fools who can't either.  Thus "private and public" debt are probably highly correlated.

Mon, 09/10/2012 - 00:01 | 2777554 ItsDanger
ItsDanger's picture

Private debt needs somewhere to be invested.  Currently, investment options are stale especially in commerce.  Too many industries are pseudo-monopolies.

Sun, 09/09/2012 - 23:11 | 2777451 wareco
wareco's picture

"As Michael Clark notes, high levels of public debt are detrimental … but it is high levels of public debt which initiate depressions:"

 

In sticking with your theme, I think you meant to say "it is high levels of PRIVATE debt which initiates despressions"

Mon, 09/10/2012 - 02:11 | 2777693 johnQpublic
johnQpublic's picture

give me a big enuf lever, and i will move the world

give me big enuf leverage and i will destroy the world

Mon, 09/10/2012 - 01:14 | 2777648 George Washington
George Washington's picture

Thanks.

Sun, 09/09/2012 - 22:15 | 2777327 BanjoDoug
BanjoDoug's picture

Your generalization about conservative readers is friggin' wrong and you must be listening to much too much MSM about what a conservative is.....

I for one am very conservative and have no desire to hand out a dime to the banksters or deploy our military to places where TPTB need to dominate raw material resources (like Afganistan, etc).....

 

Mon, 09/10/2012 - 01:16 | 2777650 George Washington
George Washington's picture

You, sir, are a true conservative ... in the best sense of the word

Mon, 09/10/2012 - 01:08 | 2777640 Amagnonx
Amagnonx's picture

I would like to see ZH a place where political generalizations, and their collective terms are completely avoided and abandoned.  It is my opinion that the politicization of economics, among many other topics, creates divisions - where none actually exist.

 

I believe that the creation of these divisions derives from techniques used in the book 1984, control of language - in this case, specifically to confuse and create conflict. 

 

Surely on ZH at least, we can stick to data, observations and reason alone.

Sun, 09/09/2012 - 22:05 | 2777301 Iam_Silverman
Iam_Silverman's picture

Hmmmmm.  Since I'm completely debt-free, does this mean that I am immune to a depression?

 

I'm all for debt jubilee, as long as it is your money being stolen.  All of the people indebted to me should still be made to pay.  Otherwise, I should go out and become overloaded on debt too so that I can eventually have "free" stuff like the rest of the debt-monkeys.

Mon, 09/10/2012 - 01:28 | 2777656 Clashfan
Clashfan's picture

It's more than that, Iam: What about people who paid off our debts? Who paid off our student loans, our houses, and our cars?

Where is OUR debt jubilee for being responsible? Why should someone else get it when we didn't? How is that fair?

I paid off my huge student loan, my very modest home, and my pathetic Kia. NO DEBT.

I am relatively poor as a result, earning a paltry income as a college instructor. When I was unemployed a few summers ago, I asked the food stamp folks if I could get aid. Guess what they said? NO because my house is paid for. WTF? And do you think I'd get a "property tax jubilee?" Laugher there, too.

So that's my problem w/debt jubilee: I paid for my shit. If you're bailing out folks who can't, what kind of a "rebate" do I get? Nothing.

Not that I want it anyway. I just don't see how it's fair at all.

What if I had been irresponsible, bought a much nicer house, built a pool, traveled a lot, not paid off my student loans, done a ton of blow and enjoyed some of the world's finest prostitutes, restaurants, and hooch? Then turned my pockets inside out and cried, "debt jubilee for me?" Shit, we haven't even had kids yet b/c we didn't think it would be fair to the kids b/c we couldn't AFFORD it. Now all these other folks popping out babies and buying them i-crap, clothes, buying their widescreen TVs so they can get a good view of Fox News weather skanks can get their debts forgiven by some official, government order?

Fine, as long as I get an equal rebate for having been responsible. Give me back half of everything I've paid for. Why not?????

Mon, 09/10/2012 - 06:23 | 2777813 ebear
ebear's picture

Exactly!  How is a debt jubilee any different than bailing out the banks that made the bad loans in the first place?

Reward bad behavior and you just get more of it.  This is not hard to understand.

Mon, 09/10/2012 - 09:37 | 2778119 Iam_Silverman
Iam_Silverman's picture

Glad to see that you folks are as bitter as I am every time I hear the call for Debt Jubilee.  Fork all of you people who bought more crap than I did and are now crying for relief!

 

Pay your bills.  Be a man of your word!

Mon, 09/10/2012 - 13:06 | 2778876 Scisco
Scisco's picture

Or declare bankruptcy. That way both sides would have to reap the consequences. The people that were over leverage would have to start living within their means, god forbid. As for the people who lent money for stupid reasons should eat a loss so they would think twice before doing so again.

Sun, 09/09/2012 - 23:07 | 2777443 All Risk No Reward
All Risk No Reward's picture

IamS, have you factored in the $232k you owe for your portion of the national debt (total national debt / people with more than zero savings)?

Add in social security and medicare and you owe over $1 million.

And the best part?  The government is financing guns and 1.4 billion bullets to make you pay what you "owe" to them.

Now add in state debt, county debt and city debt.

If you are still debt free, congrats, but there won't be many of you.

Sun, 09/09/2012 - 23:34 | 2777500 Iam_Silverman
Iam_Silverman's picture

"If you are still debt free, congrats, but there won't be many of you."

I think that you are referring to the debt owed by the taxpayers.  My plan is to retire soon, and then subsist on a meager income - hopefully low enough (or it will appear to be low enough) to have an essentially zero tax rate.  If there were some way for me to qualify for the, ahem, Earned Income Credit, I would love to get a sort of "rebate" from the government instead of breaking even.  Yes, I plan to starve the beast.  I have learned to live as a frugal person.  The real estate taxes, while inescapable, are low enough as I keep my land in agricultural production, and my house is very, very modest (1344 s.f.).  Here in Texas, your R.E. taxes are also lowered if you are a retiree.

I don't worry too much about all of the guns and ammunition that the government has ordered.  The local Sheriffs Department here is the sometimes beneficiary of that largesse, and they make it plain that they intend to share it with the "posse" if the need arises.

Sun, 09/09/2012 - 21:51 | 2777254 G. Marx
G. Marx's picture

Martin Armstrong has over 2000 years of data which shows it's public debt. If I believe you over him, I might as well believe the analysis offered by Bernanke's papers on the "great moderation" which justifies government management of economies and monetary policy. His data spans a sixty year cycle. IMO, both him and you, GW, are engaging in both cherry picking data and confirmation bias.

Sun, 09/09/2012 - 20:58 | 2777150 Stuck on Zero
Stuck on Zero's picture

Sorry, I don't believe a word of this.  Here are two reasons, brought about by government policy:

If I borrow money the interest is deductible.  If I save money the interest is taxed.

If the government is inflating the currency do I save or do I borrow.

I think this tells the whole story.  If the government starts to print like crazy then the people do the smart thng and borrow like crazy.

 

Tue, 10/16/2012 - 12:34 | 2895084 Observer
Observer's picture

True, but debt money is in practice backed by our labour because we get paid in it. As long as we work and accept payment in debt money it will have value. After all loans are supposed to be used to produce something of value that generates enough revenue to pay off the loan. It is supposed to be a virtuous circle which the loans to trade or speculate on the markets have turned into a whirlpool. So, in my opinion the problem is the structure of governance and transmission of money rather than the type of monetary system

Sun, 09/09/2012 - 20:04 | 2777059 Sathington Willougby
Sathington Willougby's picture

The federal reserve is a private institution.  

Sun, 09/09/2012 - 23:12 | 2777456 All Risk No Reward
All Risk No Reward's picture

Hi SW, people will debate ownership one way or the other.  It is kind of a quasi private public institutions.

But ownership means litte.  CONTROL means everything.

And everyone admits the Federal Reserve is CONTROLLED by private interests.

Greenspan Admits The Federal Reserve Is Above The Law & Answers To No One

https://www.youtube.com/watch?v=ol3mEe8TH7w

As for those who lie about crimes not being committed (Obama, O'Reilly):

2010-11-09 Greenspan Admission.mp4

https://www.youtube.com/watch?v=731G71Sahok

Sun, 09/09/2012 - 19:56 | 2777042 Son of Loki
Son of Loki's picture

Obama's Internet Sales Tax will kick in this Fall....crushing blow to consumer spending which is 70% of our GDP.

Many stores are in survival mode hanging on by fingertips; i.e., by their online sales such as LLBean, Amazon, JCPenny, Sears and many many more.

The post mortem on these companies, especially Sears will not be pretty.

Sun, 09/09/2012 - 19:19 | 2776959 diogeneslaertius
diogeneslaertius's picture

it should trouble us then, that our enemies have built an infinimoney machine

Sun, 09/09/2012 - 18:26 | 2776875 The Alarmist
The Alarmist's picture

It's the spending, stupid!

Sun, 09/09/2012 - 23:15 | 2777463 All Risk No Reward
All Risk No Reward's picture

Actually, it is the fraudulent debt based monetary system and the criminals who run it that are the root cause of the problem.

Summed up in two charts:

Debt Money Tyranny:

http://www.keepandshare.com/doc/3325954/debt-dollar-tyranny-2-54k?tr=77

Weapons of Mass (Criminal) Debt

http://www.keepandshare.com/doc/3324744/wmdebt-graph-3-79k?tr=77

Tue, 10/16/2012 - 12:49 | 2895133 Observer
Observer's picture

Well, we are all free to park at least some of our savings in precious metals. A lot of us even neglect to save when we can hoping good times last forever so terms like monetary system and store of value are moot for those among us. I am guilty of that myself but I've at least invested in developing skills that are in demand so I will for the most part be gainfully employed so perhaps now I can turn my attention to saving and investing part of it in precious metals. We also have to exercise our rights or those in power typically exorcise our rites!

Sun, 09/09/2012 - 18:22 | 2776866 Heyoka Bianco
Heyoka Bianco's picture

So where do you draw the line between public and private debt? "Financial sector" debt sure as hell hasn't stayed private, has it? In fact that's what this whole article seems to be saying. THis is hardly news now, is it?

Sun, 09/09/2012 - 18:28 | 2776876 Zero Govt
Zero Govt's picture

Govt is in truth a front for private interests ...so the Dept of Energy is little more than a racketeering operation to protect big oil etc from the free market (small competitiors)

But there is no question throughout history the institution that causes most chaos is Govt because it is HQ Central for both monopolists and the No.1 product to sell for bankers, debt 

Sun, 09/09/2012 - 23:18 | 2777469 All Risk No Reward
All Risk No Reward's picture

Veritas has been keyed.

At its core, the government is a gun and a jail cell.

Any high IQ criminal will focus all his/her energy securing said gunas and jail cell.

The only possible defense to that occurring is a well educated and active populace...  you can stop laughing now.

But it is what it is and the Dark Ages 2.0 will be ushered in as much by the apathetic populace as by the criminals who have orchestrated this mess (for us, not for them).

Sun, 09/09/2012 - 18:22 | 2776829 Zero Govt
Zero Govt's picture

did Mr. Taylor include Greece, North Korea, USSR and Communist China in his (selective) choice of nations?

there he will find the overwhelming No.1 culprit of all social and economic destruction, chaos and anarchy: Govt

in fact Mr Taylor, from a Govt agency, would be better focusing on careers that cause economic destruction rather than the false (flag) contruct and illusion of the nation State. He will find bankers and politicians way, way at the top of the list of career-persons that cause economic anarchy

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