How I realised there is afinancial system limit, and wrote a book about it.
In 2018, I wondered how much economic output was being spent on interest. Occasionally, when I had time for research, I looked for economic texts relating the money spent on interest to economic output. There wasnothing. Nobody seemed interested in investigating the connection between cost of borrowing and economic growth.
After a few months I tried collecting my own data. Economic output (GDP, gross domestic product) was easy. And I found plenty of statistics about government debt. Private sector debt? One could find borrowing figures for particular types of debts, but no costs. How much do people and businesses actually spend on interest? There is not much reliable data.
Therefore I formed my own estimates. The result: a calculation that one-fifth of economic output is defrayed on interest. It_s an awful figure. Yet nobody thinks about this. Journalists and politicians run after public debt data, but are silent about how much the private sector wastes.
I then tried to find a trend, which produced another revelation: using sample credit card costs, interest rates paid by the private sector have been rising even though interest earned by depositors has fallen to nothing. Again, a problem that nobody is concerned about. Is the cost of interest holding back economic progress?
Some eight years ago, I gave a couple of talks based around another concept. Central banks stimulate to escape downturns, creating extra private sector debt that itself causes the next economic upset perhaps ten years later. This central banking cycle, the cost of private sector interest, and one-fifth of economic output spent on interest, set out the basics of the theory. All that remained was to establish the shortcomings of popular solutions to excess debt, add some case studies, and a book was born. There are two case studies, a country (Puerto Rico) and the UK company Carillion.
You can read a free excerpt at www.sparklingbooks.com/limit.html, with no registration requirement, on the publisher_s website. The text is non-technical so that anyone can follow the argument. There is a modestly-priced e-book available now and printed editions can be bought from all bookshops.
How I realised there is a financial system limit
por Selena McIlwraith (12/09/2021)
How I realised there is afinancial system limit, and wrote a book about it.In 2018, I wondered how much economic output was being spent on interest. Occasionally, when I had time for research, I looked for economic texts relating the money spent on interest to economic output. There wasnothing. Nobody seemed interested in investigating the connection between cost of borrowing and economic growth.
After a few months I tried collecting my own data. Economic output (GDP, gross domestic product) was easy. And I found plenty of statistics about government debt. Private sector debt? One could find borrowing figures for particular types of debts, but no costs. How much do people and businesses actually spend on interest? There is not much reliable data.
Therefore I formed my own estimates. The result: a calculation that one-fifth of economic output is defrayed on interest. It_s an awful figure. Yet nobody thinks about this. Journalists and politicians run after public debt data, but are silent about how much the private sector wastes.
I then tried to find a trend, which produced another revelation: using sample credit card costs, interest rates paid by the private sector have been rising even though interest earned by depositors has fallen to nothing. Again, a problem that nobody is concerned about. Is the cost of interest holding back economic progress?
Some eight years ago, I gave a couple of talks based around another concept. Central banks stimulate to escape downturns, creating extra private sector debt that itself causes the next economic upset perhaps ten years later. This central banking cycle, the cost of private sector interest, and one-fifth of economic output spent on interest, set out the basics of the theory. All that remained was to establish the shortcomings of popular solutions to excess debt, add some case studies, and a book was born. There are two case studies, a country (Puerto Rico) and the UK company Carillion.
You can read a free excerpt at www.sparklingbooks.com/limit.html, with no registration requirement, on the publisher_s website. The text is non-technical so that anyone can follow the argument. There is a modestly-priced e-book available now and printed editions can be bought from all bookshops.
DK