Public debt passes private debt
The E21 Team notes that public debt has surpassed private debt for the first time in 13 years:
Households and businesses borrowed in the run-up to the crisis, and then the government massively ramped up its borrowing once the crisis hit and it had to expand. Here's a table with more exact numbers:
E21 spins this as "the false promises of a debt-fueled growth binge are now apparent to most," while I'd stick with the IMF's study showing that cutting the size of government when interest rates are near zero and private demand has collapsed has a massive contractionary impact on the economy -- which is pretty much what you'd expect. If you don't like the slow pace of debt-fueled growth, you'll really hate the double-dip recession of ill-timed austerity!
But either way, we're seeing private risk become public risk, and we eventually need to get out of that. As this New York Times story makes clear, however, the private sector doesn't want to take on more risk until the economy recovers. Of course, the economy won't recover until the private sector takes on more risk. It's the Catch-22 of recovery.
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