When debt levels turn cancerous – Telegraph Blogs

The professoriat has been a little too cavalier in arguing that debt does not really matter for the world as a whole because we all owe it to ourselves. Debtors are offset by creditors (not always from friendly countries). Common sense suggest that this academic solipsism is preposterous, and so it now proves to be.

“As modern macroeconomics developed over the last half-century, most people either ignored or finessed the issue of debt. Yet, as the mainstream was building and embracing the New Keynesian orthodoxy, there was a nagging concern that something had been missing…..There are intrinsic differences between borrowers and lenders; non-linearities, discontinuities… It is the asymmetry between those who are highly indebted and those who are not that leads to a decline in aggregate demand.”

Creditors do not step up spending to cover the shortfall when debtors are forced to retrench suddenly. So the economy tanks.

via Ambrose Evans-Pritchard|When debt levels turn cancerous – Telegraph Blogs.

One Reply to “When debt levels turn cancerous – Telegraph Blogs”

  1. Debt can be destroyed – but then WAR is no alternative – If China wants its money back from the USA – and the USA says – ‘up yours – we havn’t got it’ – do we dig our backyard bunkers?

    Politicians take advice – the advice comes from people paid high consultant fees by the Government – why do you think the consultants feed the arm that feeds them – the Climate Change debate has the same hinge structure.

    Vested interests Govern World Business who in turn fund the elected Leaders who Govern for the very Business’s who put them in office – its a screwy affair between themselves.

    The electors are the sheep fed the Media line of who to vote for on the back of who they want elected … when were sheep last deemed improtant?

    Nobody said it was a ‘fair shake’ –

    The Banks are screwing everybody – and you go to work and complain how your paypacket keeps buying less yet you work more … the little people will discover their voice soon enough – and then the Banks will scream about their debtors – and then Business will scream at the Banks – and then the Political Leaders will call in the army to protect them …

    Don’t you just love life and all its unexpected twists and turns …

    The EYE-BALL Opinion – http://www.bleyzie.wordpress.com

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