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Debt. We love debt. Money is created by issuing debt. Our monetary system is debt-based. And because we measure economic growth in monetary terms, growth comes from debt. There is a direct relationship between rising debt, rising money supply and rising GDP. To reduce the burden of debt, and stop it building up again, would mean curing ourselves of our love of debt. And that has enormous social and political implications. It is by no means cost-free.
Globally, debt has increased since the 2008 financial crisis. Much of this is in developing countries – in corporations and governments. China’s debt burden, both public and private, is already huge and still growing. Will its bubble burst? What would be the consequences? We don’t know. But other developing countries also have large debt burdens, especially in corporations. The extent of developing-country debt, both government and corporate, is becoming a matter of considerable concern to economists and policymakers.
