What is constraining consumer demand and preventing an economic recovery and thus causing unemployment to remain at high levels? Consumers have too much debt.
What is the biggest problem with the global financial system? Banks have too much debt.
What is one big thing wrong with our federal government? It has too much debt.
What is wrong with our local and state governments? They have too much debt.
What is wrong with the governments of Greece, Ireland, Spain, Italy, Portugal, Japan, Iceland, Belgium, Singapore, France, the United Kingdom, Egypt, India, Hungary and Germany? They all have too much debt.
What are we doing to our young people who graduate college with enormous amounts of student loans and huge government liabilities facing them? They have too much debt.
When I say a person or a bank or a city or a country has too much debt I mean literally they have so much debt that it is unlikely they will be able to pay it all back from their expected future cash flows.
The sixty trillion dollar question, which is just about equal to the total debt in the world, is how did we get into this mess and whose fault is it.
Some economists argue that debt levels are not relevant to societal well being because for every borrower there is a lender, so with each loan made, no wealth is created and with each default, no wealth is lost. While intellectually pure, this line of reasoning does not hold if much of the lending is coming from outside your country (China) or if by lending the money to someone it increases the likelihood that they will piss it away. Think of Greece borrowing to pay its government workers to take eight weeks vacation, U.S. homeowners taking second mortgages against their houses to buy cars, boats and vacations or our government borrowing to finance two trillion dollar wars halfway around the world. Read more…