The biggest human-created economic problem

Debt-and-GDP-II-1-15-2016-510x358

debt-chartII-2-8-2016-510x396

These two charts, which I found on a blog called PeakProsperity, show the world’s fundamental human-created economic problem.

The problem is the fact that debt is increasing faster than economic output.

This is not just true in the United States.  It is true of all the world’s advanced industrial countries.

The results of increasing debt are:

  • An upward redistribution of income from wealthy lenders to non-wealthy borrowers.
  • A diversion of capital away from investment in production to produce new wealth.
  • Another recession, worse than the last, because, as Michael Hudson says, debt that can’t be repaid, won’t be.

The United States and other industrial countries have treated the big banks and investment houses as too big to fail and their executives as too important to jail.

But at some point, either in this economic cycle or the next or the one after that, the bank failures will be too big to bail.

I like to think that the debt problem is caused by malfeasance of bankers and the wealthy.   The reason I like to think so is that this is a solvable problem.

The worse possibility is that the possibilities for economic growth have been exhausted, and that there is nothing left to invest in that is as profitable credit card debt, student debt and other forms of debt.

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