Last Friday I was on a conference panel discussing the role of
debt in a modern economy. It was an intriguing event raising
profound questions about the desirability of ever-increasing
indebtedness. Here are some of our thoughts on this complex, hotly
debated issue.
The modern financial system has enabled credit to expand at a
faster rate than the growth of underlying economies. As a result
overall debt levels – measured as the ratio of private and
public sector debt to GDP – have risen over time.
The financial crisis has led households, corporates and
financial institutions in a number of industrialised countries to
pay down debt, or deleverage. In the UK, for instance, all three
sectors have reduced levels of debt relative to GDP.
