"unless the debt is deliberately eliminated"

"Essential Posts" in the sidebar of Steve Keen's Debtwatch lists “No-one saw this coming?” Balderdash!, by Cassander. The post is a review of a study by Dirk Bezemer (of Gang8, and the University of Groningen).

"Bezemer did an extensive survey of research" and found "eleven researchers" who saw the crisis coming. "Bezemer then looked for the common elements in the way that these researchers analysed the economy." This is good:

He argued that if there were common elements—and if these differed from the approach taken by the overwhelming majority of economists, who didn’t have a clue that a crisis was approaching—then the only useful economic models would be ones that included these common elements.

He identified four common elements:

1. “a concern with financial assets as distinct from real-sector assets,
2. with the credit flows that finance both forms of wealth,
3. with the debt growth accompanying growth in financial wealth, and
4. with the accounting relation between the financial and real economy.”

A non-economist might look at these elements in puzzlement: surely all economic models include these factors?

Actually, no. Most macroeconomic models lack these features.

And, from the conclusion of the article:

... economic performance for the next decade or more will be driven by the private sector’s attempts to reduce its debt levels, and this will depress economic activity for years. Unlike a tsunami, a debt crisis is a wave of destruction that keeps on rolling unless the debt is deliberately eliminated.

Everything that is being done by policy makers around the world is instead trying to restart private borrowing.

I know.