Sunday, December 26, 2010

Emphasis Added

A remark by Jake of EconomPic, from The Story of Income and Outlays:

Slowing growth (not a downturn in growth) is all it takes for a levered financial system to be strained.

Let's make it: Slowing growth is all it takes for an excessively levered financial system to be strained. It is a way, in hindsight, to determine whether our economy was safely or excessively levered.

Finance, fractional reserve banking, risk, debt, capitalism, the use of other people's money -- all these things are essential in any but the most primitive economy. But excessive application of these essentials too often threatens to return our economy to a most primitive state.

UPDATE: 17 JAN 2011

From Steve Keen's Debtwatch, the 16 December 2010 post: was to me (and many other non-neoclassical economists) all too evident that, at some stage, this growth of private debt would have to cease. When it did the mere fact that its rate of growth had slowed would cause a major recession.

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