Tag Archives: private debt

A close parallel to this situation was the state of Third World debt in the mid-1980s. Mexico’s announcement that it could not meet its foreign debt service was the shock that brought ugly financial reality into conflict with the assumption that somehow any government debt could be paid – even debts denominated in a foreign currency. The international financial system was rescued by the issue of Brady bonds – “good” new bonds for old “bad” ones. The capital value of these bonds was still...

Photo - Black swans in Regent’s Park, London - by Jeremy Smith T. Sabri Öncü ([email protected]) is an economist based in İstanbul, Turkey. This article was written on 8 March 2020 and first published in the Indian journal Economic and Political Weekly on 14 March 2020.Whether a black swan or a...

Michael Hudson filtering up. Zero HedgeCanceling Debt And The Debate Over 5,000 Year Old Economic Policy Tyler Durden

Building on the International Monetary Fund (IMF) Global Debt Database (GDD) comprising debts of the public and private non-financial sectors for  190 countries dating back to 1950, Mbaye et al (2018) identify a recurring pattern where households and firms are forced to deleverage in the face of a debt overhang, dampening...

Debts that can’t be paid, won’t be. That point inevitably arrives on the liabilities side of the economy’s balance sheet. But what of the asset side? One person’s debt is a creditor’s claim for payment. This is defined as “savings,” even though banks simply create credit endogenously on their own computers without needing any prior savings. When debts can’t be paid and debtors default, what happens to these creditors?  Michael Hudson — On Finance, Real Estate And The Powers Of...

On July 26, 2018, UK Guardian columnist Phillip Inman published an article – Household debt in UK ‘worse than at any time on record’ – which reported on the latest figures at the time from the Office of National Statistics (ONS). He noted that the data showed that “British households spent around £900 more on average than they received in income during 2017, pushing their finances into deficit for the first time since the credit boom of the 1980s … The figures pose a challenge to the...

This dramatic rise is most likely caused by austerity and the government’s reduction of the deficit, though the post referendum stagnating wages and rise in inflation has also spurred on the level of debt. The relation with public and private debt is one that is of increasing interest to Post-Keynesian economists especially those who put their faith in Modern Monetary Theory. MMT would suggest the dropping government deficit is pushing the rest of us into deficit but the way the government...

This article is a continuation of previous comments on financial crises, with two lines of discussion. The first is a bit of a primer, explaining why I and other commentators associate financial crises with a buildup of private debt. The second part discusses the main problem with associating crises with private debt buildups: growth in debt stocks is by itself not enough to trigger a crisis. The catch is a variant of the efficient markets hypothesis: if we could easily forecast crises, it...

From earlier private debt crisis 10 years ago - President Bush welcomes then Prime Minister Erdogan of Turkey to the G20 Summit on Financial Markets and the World Economy, Nov. 15 2008, Washington D.C. White House photo by Chris Greenberg. This article first appeared in the Indian Journal the Economic...

The media has been giving a lot of attention in the last week to the 10-year anniversary of the Lehman Brothers crash which occurred on September 15, 2008 and marked the realisation, after months of denial, that there was a financial crisis underway. Lots of articles have been published recently about what we have learned from this historical episode. I thought that the Rolling Stone article by Matt Taibbi (September 13, 2018) – Ten Years After the Crash, We’ve Learned Nothing – pretty much...