More wisdom from one of my favourite economic commentators...
Interview with Jeremy Grantham, Chief Investment Strategist, GMO
So if debt doesn't create growth then why the heck have we been allowing debt to grow so substantially? Where is the intellectual rigour in these decisions? either to actively engage in the issuing of more debt (banks) or to sit by and allow it to happen (governments)?
The UK government is one of the most indebted as measured in % of GDP despite record economic activity, bumper tax income and super low unemployment rates. They have inflated the public sector's slice of GDP and (assuming a recession is nigh) will have to either (A) take on much more debt to pay all of those public workers in the next few years or (B) make massive public sector cuts. They have absolutely no cushion for this potential recession, as far as I'm concerned they have been grossly irresponsible. No doubt they will say that no-one could have predicted the coming recession, well, umm actually, dunno if you'd noticed chaps but they kinda happen every few years.