This blogbook offers, with the aid of various charts, graphs, and tables, a pictorial guide to the 2008 financial crisis.
History is Not Bunk
Here's an even longer term view, though measuring non-public debt as a percentage of GDP (rather than, as in the previous charts, total credit market debt). The maker of the chart, with the red line, is suggesting the contours of a long or Kondratieff wave, but it is the gold line to which we draw attention here. It shows the unprecedented nature of current debt levels.
This is especially a problem for the Anglosphere--Britain and Australia also imbibed deeply the sweet elixir. The White Man's Burden, it turns out, is debt. The chart below from Australian economist Steve Keen makes the point.
In the midst of a debt crisis, the question naturally occurs: how is it that the authorities seemingly took no notice as debt levels reached these historically unprecedented levels? What were they thinking? Keen supplies a disturbing answer:
"It has happened because Central Banks are run by economists, and the dominant “Neoclassical” faction within economics ignored the real lessons of the Great Depression.
The false lesson that Neoclassical economics preaches is that the market economy is fundamentally stable, and the Great Depression was caused by the monetary authorities tightening credit in the aftermath to the Stock Market Crash, rather than loosening it.
The real lesson of the 1930s is that a credit-driven market economy is fundamentally unstable, and a Great Depression occurs when debt-financed speculation results in excessive private debt at the same time as inflation is low."
Under "the misguidance of conventional economic theory," and with their "Neoclassical eyes fixated on the rate of inflation," central bankers and other official organs ignored the huge buildup of private debt. "This is why the sudden collapse of the world economic order took economists by surprise. They were looking at their mathematical models, which ignore private debt (and indeed money!), rather than at the real world, where debt is king."
To see the presentation in order, use either the Labels below for each chapter or the Table of Contents for individual entries.
The initial presentation was made in October 2008 and was last updated in January 2009, though I recently substantially expanded the list of sources. Lately, I have been working on a blogbook called Energy Predicament.
My dubious record for 2008 is reviewed here, by some miscreants.
FEELING GLUM AND OUT OF SORTS, PERHAPS A BIT ANGRY?
YOU HAVE EVERY RIGHT TO FEEL THAT WAY.
A good number of my charts first appeared at Contrary Investor. Though oriented toward investors, CI offers a superb analysis of the real economy and its relationship to the financial system. It is an indispensable source not only for individuals but also for any good library. So subscribe, dammit.