The deepest recession in the last half-century was caused by the "irrational exhuberance" of sub-prime debt creation. To correct the crisis, economies were expected to deflate. That was the rational expectation, but plutocrats being irrational animals despite their oversized brains, deflation has not occured. Look at this chart:
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| source: James Quinn @ marketoracle.co.uk |
Most of the increase in global debt has been in the government sector because central banks have been monetizing private debt to prevent a total collapse of the world financial system. World debt as a percentage of world GDP is about 300% or
three times the world's econmic capacity. It can never be paid back, so the plutocrats who control capital are looking for ways to screw the relatively impoverished. Ludwig von Mises, founder of the "Austrian School" of economics, wrote that an economic boom brought about by credit expansion will inevitably collapse if deleveraging is not sooner implemented. The charts shows credit expansion accross all sectors of finance. Households, which have attempted to pay off some of their debt has a decrease in debt
growth over the pre-crisis level.
This chart shows the relationship between US GDP and net worth over the past forty-five years. It was fairly steady prior to the dot.com mania and Federal Reserve bubble creation. After each boom, a correction (read recession) took place. Absent a massive increase in GDP (unlikely) the unsustainable ratio will once again revert to the norm.
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| source: zerohedge.com |