As Adair Turner shows in his new book, Between Debt and the Devil, private sector debt soared as a share of GDP in most advanced economies after the 1980s, fuelling unproductive, debt
financed household consumption, housing bubbles and wasteful financial speculation.
Not exact matches
As savings were force up structurally, whether because of rising income inequality or a declining
household share of GDP, the system responded in ways that were sustainable (increases in productive investment) and in ways that were unsustainable (rising inventory in China, increases in speculative investment in the US, China, and Europe, and increases in credit -
financed consumption in the US and southern Europe).
Until we understand this do not expect the global crisis to end anytime soon, except perhaps temporarily with a new surge in credit - fueled
consumption in the US (which will cause the trade deficit to worsen) and more wasted investment in China (which, because it is
financed with cheap debt, which comes at the expense of the
household sector, may simply increase investment at the expense of
consumption).
While most of this borrowing has been used to
finance the acquisition of dwellings, including by investors,
households have also increased their borrowing to
finance consumption.
Growing concerns about the UK economy can be seen in the responses to our questions about
household finances and
consumption:
The Blair / Brown economic legacy was one of under - investment in key infrastructure, notably transport and energy; a continuing decline in manufacturing contributing to a structural balance of payments deficit; an accelerating regional economic divide; and a speculative property and construction boom
financing public and private
consumption through highly leveraged government and
household debt.