A second look at the heteconomist post

The other day I looked briefly at PeterC's Why Neoliberals Pretend Private Debt Doesn't Matter and Public "Debt" Does. Time for a second look.

Consider the opening sentence of the post. PeterC writes:

The neoliberal policy approach in the decades leading up to the crisis basically amounted to enticing or pushing people into increasing levels of private debt.

What is "neoliberal"? Wikipedia doesn't help. Bill Mitchell writes of "the early 1980s (as the neo-liberal onslaught began in earnest)."

The early 1980s, then. Since Reagan, basically. Same as my K-R Shift. And actually, in his post PeterC writes

...the neoliberal attack on workers' pay and conditions from the early 1980s onwards was highly orchestrated.

The early 1980s it is. So reconsider Peter's opening thought, revised:

The policy approach since the early 1980s and up to the crisis basically amounted to enticing or pushing people into increasing levels of private debt.

Is it true? It must be true, right? I mean, how else did we end up with all this debt.

Yeah, but take a look at the rate of debt growth since the 1950s:

Graph #2: Percent Change in the Non-Federal Portion of TCMDO (blue)
If I did it right, the red line is a Hodrick-Prescott trend of the debt data.

The first thing that happened "after the early 1980s" was a slowdown in debt growth! A slowdown beginning in the mid-1980s. Immediately after the early 1980s there was a major downtrend in the growth of debt.

But by the late 1990s, the growth rate of debt was back to normal. Back to 10% annual, give or take. Back where it was before the neoliberals took over. Back where it was in the Keynesian years.

What's different is that in the Keynesian years, excessive debt growth led to inflation. In the neoliberal years, excessive debt growth led to unemployment. That's the main difference.

The problem is the excessive debt growth: the excessive reliance on credit, the excessive cost of circulating money, excessive finance, excessive accumulated savings, excessive accumulated debt, all the same thing. It's a cost-push problem.

The liberal solution to the cost-push problem is inflation. The conservative solution is unemployment. The Arthurian solution is to reduce financial costs by reducing the size of finance, providing more money to balance against less debt, using policy to limit the amount of creditmoney that can be generated from a dollar of money.

The Arthurian solution is to reduce the factor cost of money.