A Debt-Induced Growth Cycle Ends in Disaster


Following up yesterday’s talk about the thought that, during the long prosperity of 1985-2000 and in the 1920’s, people were of the opinion that modern economic policy had eliminated the risk of economic turbulence – but was merely the calm before the storm.

Here is a follow up to that – a lecture by Steve Keen on the correlation of using debt to expand the economy and its eventual disastrous climax:


He argues that the speed of the downturn is not as quick as the Great Depression due to government spending; but the rate of private deleveraging is increasing faster than that.

Keen also argues that Greenspan and Bernanke caused the Great Recession with cheap credit – low interest rates. We should have had a milder recession not what we are getting.

It seems to be an interesting argument. So many people have opinions – perhaps it just makes sense to keep your bills low, stay flexible, keep a safe place to live and save some money – because the future is unknown, but is sure to be exciting!