Debt in the US and globally has been accelerating since 2010. The absolute level of debt, however, is not ipso facto the problem. Debt is not per se the problem. The problem is how debt drives financial asset investment (as well as real investment) and how that debt is ‘financed’ (principal & interest paid and under what terms) determines how debt causes financial bubbles, precipitates financial asset deflation, and then spills over to slow and then crash the real economy. The global economy is now undergoing a major real slowdown, led by declines in manufacturing and construction (i.e. real goods). At the same time, financial asset bubbles are going bust and price deflation is occurring and spreading worldwide (stocks, bonds, foreign exchange (forex), property, oil and commodity futures, crypto currencies, and of course derivatives of all kinds as well. How the rapidly slowing real economy will interact with the financial asset markets decline will determine the trajectory, velocity, and contagion between the real and financial economies–and thus the next crisis which is approaching. We are at the beginning of that process, as financial markets continue to deflate and the real economy continues to slow. Some times the financial sector implosion drives the real decline, as in 1997-98 and 2008-10; sometime the relationship is reversed, as in 1990-91 and 2000-01. Whichever force dominates, however, it means financial cycles and real economic cycles begin to mutually determine and feedback on each other, further exacerbating the downward cycle of both.
Listen to my Alternative Visions radio show of January 4, 2019 and my discussion of the relationships between debt, finance and the real economic slowdown now beginning.
To LISTEN GO TO:
http://prn.fm/alternative-visions-debt-role-recession/
Or GO TO:
http://alternativevisions.podbean.com
SHOW ANNOUNCEMENT
Dr. Rasmus explains the role of debt in generating financial asset price bubbles in 21st century capitalism, and globally since 2008-09 last crisis. How debt may play a positive role in generating real investment or how credit and debt may divert into financial asset markets instead, creating bubbles and eventual financial asset markets deflation. The latter has been increasingly the case in 21st century global capitalism, creating a growing instability in the system. Where has the debt been going since 2008-09? Households, corporations, and governments. ‘Bad’ debt (fueling financial markets) now exceeds ‘good’ debt (financing real investment in making things, creating jobs, raising incomes). Rasmus explains why there’s an emerging global manufacturing recession underway, as well as declining construction, and how it’s spilling over to tech sector and later will as well to services, creating a recession by late 2019 or early 2020 in the US and globally. How debt acceleration has been responsible for the record levels of stock markets, bonds, foreign exchange speculation, oil and commodities speculation, property prices, etc. from 2010 to 2017. Why those financial asset markets are now all deflating. What will be the causal consequences for the global manufacturing and construction recessions emerging now as well.
Dr. Jack Rasmus @drjackrasmus
Jack Rasmus 
Important post. The havoc caused by excess credit/debt is and will be huge. Thus your call to nationalize the banks. A critical issue. It might have been nice to mention Minsky (again); debt is inflexible, income is not. We are close to a Minsky moment.
Yes, Minsky is relevant. Read my chapter 18 in my ‘Systemic Fragility’ book for a consideration of Minsky’s contributions–and limits–to the understanding of the relationship of debt to real investment and growth, on the one hand, and financial asset investment, instability, and financial crises, on the other. From one perspective, my work is an attempt to expand and further develop Minsky’s analyses to the changing global financial structure of 21st century finance capitalism and the current capitalist system in general. The last third of the aforementioned book is really a book itself critiquing economic theory’s inability to understand financial cycles and their effects on the economy. Included are a treatment of classical economics, marxist economics, Keynesian economics, Minsky, and then my own views and how they related to all the above (or don’t).
In my view the biggest issue is bad debt. Artificial low interest rates results in bad loans where companies get access to debt they never should have gotten in the first place. For instance, the amount of zombie companies in the Russel 3000 index is above 16%. That level is absolutely insane.
The same is true for regular consumers. We all saw what happened when the housing market burst during the last recession, and we have the exact same problem today.
Not to mention the enormous government debt..