The Economist gets it right

What has changed in three years?

In mine of September 17, 2010 I looked at an article from The Economist:

From A special report on debt: Repent at leisure, The Economist, 24 Jun 2010

Hyman Minsky, an American economist who has become more fashionable since his death in 1996, argued that these debt crises were both inherent in the capitalist system and cyclical.

Inherent, and cyclical. Agreed. At The Economist, they know an impressive statement when they see it, at least if the speaker is fashionable.

Debt increased at every level, from consumers to companies to banks to whole countries. The effect varied from country to country, but a survey by the McKinsey Global Institute found that average total debt (private and public sector combined) in ten mature economies rose from 200% of GDP in 1995 to 300% in 2008... There were even more startling rises in Iceland and Ireland, where debt-to-GDP ratios reached 1,200% and 700% respectively.

"Debt increased," the Special Report says, but "the effect varied." The excerpt suggests the "effect" was that debt increased, and the variation was that it increased to various levels. This is not an impressive analysis.

Today (18 September 2013) a Reddit link brings me to The dangers of debt: Lending weight in The Economist of 14 September:

It was the growing rate of default on home mortgages in America that precipitated the financial crisis five years ago. These delinquencies, although not enormous in themselves, became impossible for some investment banks to bear, thanks partly to their own heavy debts. As the contagion spread throughout the financial sector in 2007-08, nervous or cash-strapped banks and other creditors stopped lending, thereby infecting the rest of the economy. Deep recessions and big financial rescues then led to a surge in government debt. That, in turn, raised fears about the solvency of various countries in the euro area, culminating in Greece’s default in 2012. Debt was, then, both a cause and a consequence of the crisis, and remains a big reason for its continuance.

Three years ago they couldn't even identify the problem with debt. Today they can identify it, they do identify it, and they use it as their opening statement! Even if The Economist is still just being fashionable, and nothing more -- and I'm not saying that's the case -- the story is definitely different now. That's a good thing.