BBC’s Robert Peston: UK’s debt ‘biggest in the world’
The indebtedness of the UK – that’s the sum of household debts, company debts, government debts and bank debts – had risen to 492% of GDP, or almost five times the value of everything we produce in a single year.
…and is still the biggest relative to GDP of any of the big economies.
Japan’s debts were also 492% of GDP. US indebtedness is less, at 282% of GDP.
So what’s going on?
Well partly it’s to do with a phenomenon, that debt has been shuffled from the private sector to the public sector.
When banks stopped lending, and private-sector spending and investing collapsed, governments continued to spend, even though tax revenues were falling. So public-sector borrowing exploded.
To be clear, if governments had not continued to spend, our recession might well have become something much worse, a 1930s-style depression.
But it is fair to say that a consequence of banks, households and businesses trying to repay their debts has been a big increase in government borrowing.
What it means is that we must brace ourselves for many years of relatively low growth, perhaps 1% versus the 3% of the 16 boom years before the crash, because we no longer have the fuel of borrowing more and more every year.
The Divine Right of Capital, by Marjorie Kelly [link to .pdf]
In an era when stock market wealth has seemed to grow on trees—and trillions have vanished as quickly as falling leaves—it’s an apt time to ask ourselves, where does wealth come from?
More precisely, where does the wealth of public corporations come from? Who creates it?
To judge by the current arrangement in corporate America, one might suppose capital creates wealth—which is strange, because a pile of capital sitting there creates nothing.
