Economists Ignore One of Capitalism’s Biggest Problems

By Steve Keen – According to the mainstream, the rate of growth of debt is generally irrelevant to macroeconomics, because lending simply redistributes spending power from savers to investors—it doesn’t create spending power in its own right.

What matters is that socially useful projects are funded which then fuel economic growth. How much private debt changes every year is simply a side-effect of getting money from savers who don’t spend, to investors who do. And huge changes can occur in the level of private debt without any impact on the rate of economic growth.

This wouldn’t matter if we could ignore the mainstream of the economics profession, but we can’t, because they are the key individuals who influence the economic policies that are actually put in place by politicians. more>

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