The Mismatch Between Debt Growth and Economic Growth and the Propaganda Term of Bad Debt

Executive Summary

• The term bad debt is used and the term bad loan avoided to shift the blame to the borrower versus the creditor.

Introduction

“The amount is going to be much greater next year and much greater the year after that because accruals of interest and it’s going to; you know, you talk about bad debt, that’s the propaganda word! Why don’t you say bad savings, bad loans? When you say bad debt, you put all the blame on the debtors. The fact is the banking system has become dysfunctional, the debts cannot be paid. No economy can ever pay off all the debts because of the exponential growth of debt being faster than the S shaped curve in the economy. So, no matter what, we’re going to have rising and rising and soaring exponentially soaring volume of debts that can’t be paid. If you say they are bad loans what should be done to the banks is what you did, in Germany in 1948, ‘The Economic Miracle’, you start all over again. It’s natural for people to run into debt. The idea is to have a good financial system would be about productive credit, credit to actually enable people at the economy that produce more to earn enough to carry the debt, but the financial system is not focused on productive loans, it’s focused on loans to increase the asset prices. Yeah, banks lend against the real estate and stocks and bonds already in place, not to really help the economy grow, so all you have is a financial overgrowth of overhead.”

Source: Michael Hudson

https://michael-hudson.com/2020/12/jubillee-perspectives-with-steve-keen/