Since the 2008 Great Financial Crash, and perhaps even before, we have had a peculiar attitude to debt.Most of the Western, developed economies have relied on debt to keep developing and growing, but that is hardly a sustainable way to carry on.If you think about it the whole notion of usury debt is unacceptable. Despite lenders being open and telling borrowers how much they are charging, whether 10% or 1,000% interest, does that make it acceptable?
And what about the fees: assessment fee, valuation fee, arrangement fee, introduction fee, securitisation fee, documentation fee, monitoring fee, review fee, default fee, termination fee, early termination fee.
Again, even if transparent, are they reasonable?Debt has been crucial to the survival of the current economic model. Central banks make $trillions from debt using zero interest rate policies and purchasing corporate debt, as the European Central Bank (ECB) has been doing in order to keep the post-crash economic show on the road.
Are we living in a Through the Looking Glass post-capitalist world?
Is all this just adding more fuel to the fire? Is keeping inflation artificially low for so long merely extending a creeping market in zombie companies, even zombie countries?
Originally, zero rate policies were seen as a temporary measure post 2008 to stave off a global recession but was the objective really saving jobs or saving the banks?
At the time the argument was that the banks were “too big to fail” and if not helped the consequences for all of us would be dire.
Eight years on and nothing much seems to have changed. Governments are still buying bank debts and how does this relate to the bonuses paid to professional executives and bankers?
There have been few prosecutions over the speculation and risks that were taken and there is not much evidence that the culture of institutional fraud does not still prevail.
While some debt is deemed acceptable, a lot of debt is not. The appetite for investment in the businesses that we need to support to sustain our economy is not there due to the distortions of the market that have arisen from flawed policies aimed at preserving bankrupt countries, banks and businesses. The stock market too is being driven by the whole issue of where to go to put money in a safe place.
So businesses remain starved of investment funds for their medium and longer term growth, productivity remains below what it should be and the public goods, such as education, remain starved of funds to produce the skilled workforce that will be needed for the future.
But the banks, the rent seekers and the professional executives protect their interests and stay safe.
Feel free to disagree.