Fascinating how discussion of the current economy almost always ignores the enormity of total debt, public plus private. We keep hearing how the rise in sovereign debt will burden our grandchildren, but the much-discussed $13 trillion of US national debt is less than 1/4 of the total debt carried by the populace.
The underlying assumption is that public debt is bad, private debt is good, and there is no need even to mention total debt, since the monetary system is basically stable. To fix the system, we keep being told, we only need to limit public spending ("tighten our belts") and rein in Wall Street to prevent those nasty ‘cycles’ of asset bubbles building and crashing.
Meanwhile, almost no one questions why total debt keeps rising, or how high it can go before it becomes unsustainable, or what happens if and when when it reaches its limit.
Why isn’t the economics profession, and the popular press, addressing these questions? When total debt reaches $50 trillion, as it has in the US, isn’t it quite possible it has hit an upper limit of sustainability? That’s $600,000 per family of four. At 5%, their interest payments would total $30,000 per year, some direct, some indirect. That's $30,000 of their income that they can't consume or invest because it is diverted to interest payments.
Is it any wonder total debt can’t go any higher? What happens when it hits its limit? Why is this never discussed, except by a few economists like Steve Keen and Ann Pettifors? How can it be ignored by the likes of Paul Krugman and Dean Baker?