A lot - but not all - of it has been borrowed for worthwhile purposes.
Recently it's been leveling off:
This is the Parliamentary Library paper that explains what's been happening.
A commenter asked whether I thought the explosion in private foreign debt mattered much.
I replied that I didn't think it mattered much in and of itself.
But I noted that markets may (suddenly) take a (quite possibly irrational) set against it, which would make my own views beside the point.
I wrote about the danger here.
5 comments:
I'm wondering if the first graph reflects the consequences of the "User Pays" dogma that all Australian governments so fervently adhere to.
If markets are rational, this debt load is a Good Thing (both borrowing and lending is freely undertaken as being profitable for both parties. Its a win-win deal).
But who can trust markets to stay rational?
I didn't say private foreign debt, I just said private debt.
Mr 40% has lots of debt to GDP charts here. What's striking is what happened the last time debt exploded.
Pete, I gather you subscribe to the view that private debt can and will keep growing forever? If so, is there a limit to the levels of private debt an economy can sustain? Is it 5x GDP? 10x? 100x?
Thanks for linking to Steve. But no thanks for putting words in my mouth.
Steve's figures appear to be gross debt figures. I'd prefer to see net ones.
If I owe you $30 and you owe me $30, Steve would apparently have our total "debt" at $60. Wouldn't it be better to describe it as zero?
As it happens the household sector as a whole is a net saver at the moment (a net repayer of debt).
Debt needn't inexorably grow, for all sorts of reasons - some of which involve the fallacy of composition.
The government debt graph makes this clear.
Huh?! What words did I put in your mouth?
FWIW, I'm perfectly relaxed about government debt in Australia. I have no arguments with you there, and I'm amused as you are at the Libs working themselves into a lather about government debt.
When you say the household sector is a net saver ATM, do you mean households are now living within their means and paying down debt? If so, isn't that evidence of the deleveraging process Steve has been banging on about for years? After all, its not the expansion in credit that does the damage to the economy, its the deleveraging that follows.
Sure, its not a big problem in Australia (yet) but its already happening in the US as Krugman points out.
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