GLOBAL DEBT NOW TWICE THE SIZE OF THE GLOBAL ECONOMY… WHAT DOES ...March 26, 2015
Here's a story that many of you shared, though I am going to draw your attention to the Washington's Blog for this story (which was shared by Mr. S.D.):
Now, the question is, indeed, what does this mean. The debt-to-GDP ratio of individual countries in the world has skyrocketed to historically unprecedented scales, and, as the article itself avers, the debt-to-GDP ratio stands at a place that has no precedent in human history; indeed, without any precedent, how to explain it? What does it mean? Will any conventional economic, or fiscal, analysis, really do it justice? Can it really be reasonably argued that this is confirmation of the "favorite" schools of thought, whether they be of von Hayek, von Mises, Rothbard, Keynes? THe article itself makes clear what it is for: a debt jubilee, a write of - a forgiveness -- of bad debts. But whose? the big banks? the small individual debtor?
But again, I cannot emphasize my own personal displeasure with these types of analyses, for they all have one thing in common: they're only looking at one half of the balance sheet, that is to say, they're only looking at the public system of finance, and indeed, if one only looks at that, one obtains a rather bleak picture. Thos debt-to-GDP ratios that inform so much recent financial analysis are only looking at the public GDP, at the public assets. But there is a hidden economy, and it's quite large. There are hidden technologies - hidden assets and hence hidden gross domestic product - that we can only guess at, not only in terms of the size of those things in relation to the rest of the economic pie, but at their capabilities.What happens to economic analysis if such a hidden system has grown so large it has literally swallowed the public system? What happens to financial and economic analysis if such a system, having swallowed or overwhelmed the public one in the sheer scale of its operations, is nevertheless completely ignored by financial and economic analysts who continue to focus only on the public one? Would their confident and easy Keynesian or Austrian school predictions and dogmas perhaps paint a very false picture of the world's finances?
The only individual whom I know to be even close to attempting the kind of financial analysis I am suggesting here is former Assistant Secretary of Housing and Urban Development during the GHW Bush administration, Catherine Austin Fitts. On her view, the public system is being gradually and deliberately unwound and the hidden one being brought more and more into light, in a kind of "slow burn" rather than "collapse" scenario. And she stresses, there is much more liquidity, and in the case of the US, much more sturdiness, in the system than other experts give credit. The key, of course, is future technology and advance.
To be sure, the lending and derivatives and sub-prime spree that the West was on prior to 2008 was financially insane, and that's putting it euphemistically. But that highlights the two interpretive choices we see before us: we are confronted either with a financial world that essentially "went crazy" and has decided to stay thereand continue its craziness because it has no other solutions, which is more or less the underlying common meme behind current conventional financial analysis, or there is something else, some other factor, at work, out of view for the moment, but whose telltale signs are slowly beginning to seep through the cracks. I don't doubt, nor dispute, the analyses of those who contend the current picture is crazy, and that something like a "jubilee" may be in order. But by the same token, I don't that that the public economy is the whole story, nor, really, in the final analysis, do I think we are looking at a picture that only includes the gross domestic product of planet Earth...
See you on the flip side...