Friday, February 06, 2009

The Great Repression

They need to grow up and face the harsh reality: The Western world is suffering a crisis of excessive indebtedness. Governments, corporations and households are groaning under unprecedented debt burdens. Average household debt has reached 141% of disposable income in the United States and 177% in Britain. Worst of all are the banks. Some of the best-known names in American and European finance have liabilities 40, 60 or even 100 times the amount of their capital.

The delusion that a crisis of excess debt can be solved by creating more debt is at the heart of the Great Repression. Yet that is precisely what most governments propose to do.

Read the rest of Niall Ferguson's article here.

[HT: Real Clear Politics]

1 comment:

Anonymous said...

My thinking is that the American public, by and large, has accepted this truth, as have the US business. The ones who were well-poised to take advantage of this sudden aversion to debt have been able to buy real estate and equity at rock bottom prices. The ones who make money through extending and using credit are totally crushed.

Sooner or later congress will catch on and stop thinking of debt the way they currently do, and will catch up to the public. If the drunken sailors there cannot grasp this, then they will be replaced with ones who do.