We don’t credit Greenspan’s Body Count with debt-related deaths in other countries. Even if Alan Greenspan led the global debt bubble by example, foreign central banks and governments could have, and should have, been wise enough not to follow.
Nevertheless, this story from the UK provides a useful reminder of the tragedy of a debt-funded consumer culture.
A new study has revealed that the suicide rates are soaring across the UK with money worries pushing many people over the edge.
The study commissioned by the charity Papyrus, which aims to prevent suicide among young people, highlights the fact that cuts to mental health services and aggressive debt collecting are among major factors aggravating the situation.
It cited the tragic death of a young boy aged just 23 as an instance, noting that “the boy took his own life writing his final words on the back of a bank statement after racking up a 3000 pound overdraft and a five thousand pound student debt”.
According to latest figures, the study revealed, suicide is on the increase in the UK accounting for 6000 deaths between 2010 and 2011, which shows a rise of 7 percent.
Tragically, Ben Bernanke’s, and other central bankers’, solution to the debt crisis is more debt. “Consumer credit” they call it, and more of it is a sign of a healthy economy in their twisted Keynesian minds.
When will they ever learn? When will they ever learn?
W.C.: I agree that our debt culture is and has been a major problem, but I’m not sure that “consumer credit,” at least, can be laid at the door of Keynesian economics–at least, I’ve never before heard Alan Greenspan considered a Keynesian. I could be wrong, but I’m under the impression that Keynesian economics sees a positive role, under some circumstances, for government debt; where it stands on consumer debt, I frankly have no idea. But consumer debt, masquerading as “consumer credit,” has been the fuel in the engine of consumer capitalism for the past hundred years or so, and I’m pretty sure its use predates Keynes. In any case, I agree that our economy now depends on levels of consumer spending that can only be sustained by “consumer credit” which simply loads consumers with debt–it’s all very dispiriting. “The Paradox of Thrift” and all that: if “consumers” all decided tomorrow to stop playing the “borrow and spend” game, our economy would tank…
Keynesianism is best known for its prescription of government spending stabilizers, but the entire Keynesian framework focuses on “aggregate demand,” which, at the present time is about 70% consumption and its growth is entirely funded by debt.
Consumer debt by any measure (inflation-adjusted per person, % of GDP, etc.), was tiny in the pre-Keynesian era compared to today’s levels.
Not that it’s all Keynes’ fault. There are cultural factors and bad policy factors that caused consumer debt to go ballistic in the 1990′s and 2000′s. And I often say that Keynes would be horrified to see what modern “Keynesians” have done in his name.
Have you read THE GENERAL THEORY? Few people who criticize him have read what he wrote. Cowen went through the book a few years ago and reviewed it chapter by chapter. A good exercise if you have not done so. He had some odd, I think, ideas about money, but his theory really wasnt just govt borrowing to increase demand. He also insisted that when the economy was stronger, the debt must be worked down. We actually did this pretty successfully until 1980. Then we started getting conservative presidents.
Steve
Time Magazine: Alan Greenspan, Keynesian.
Alan Greenspan the Objectivist? If he’s a Keynesian, surely it’s in a “we’re all Keynesians now” sense, not in a sense that would meaningfully distinguish him from others with similar jobs and credentials.
Lynn: the Time article to which W.C. provides a link indeed takes more or less the “We are all Keynesians now” approach–or else the author just intended to be provocative.
Lynn. It is just a pejorative. Greenspan is a Randian Objectivist. Time can call him whatever they want.
Steve
My good Lynn,
I think it’s safe to say we can understand Alan Greenspan to be a Randian Objectivist in the same sense we can understand Joseph Aloisius Ratzinger to be a National Socialist.
Beyond that, and beyond our good Steve’s arbitrary declarative pellets that it simply is so, an explanation of where and how a Federal Reserve Bank and its chairman would fit into Randian Objectivism is required to understand Federal Reserve Chairman Alan Greenspan as having functioned as anything approaching a Randian Objectivist.
H. M. Stuart
Alexandria
W.C.: Thanks for the clarifications. You’re certainly right about the “aggregate demand” thesis, which is why Paul Krugman and others want the government to spend more to compensate for lower consumer spending. I assume that it’s this need for higher and higher “aggregate demand” that also leads to a succession of financial “bubbles”: stocks, housing, student loans, etc. As I said, you and I are in agreement about the consumer debt overload, and (I think) about both its fiscal and its moral consequences. “That’ll be cash on the barrel head, son” strikes me as a more prudent approach to individual/household finances than “Take it home right away, and get three years to pay”.
Nope. It was the massive deregulation of the financial sector and the ability of capital to flow freely wherever it wanted. Reinhart and Rogoff documented that the liberalization of banking rules coupled with the freedom of capital to move w/o constraint leads to banking crises. Go back and look at when our rise in debt, personal, corporate and public starts. All around 1980. That is not when Keynes was ascendant.
Steve
“It was the massive deregulation of the financial sector and the ability of capital to flow freely wherever it wanted…”
“We actually did this pretty successfully until 1980. Then we started getting conservative presidents.” (Steve)
.
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Since 1980: Reagan (Center-Right/socially Conservative)
Bush Sr (Keynesian/socially liberal Republican)
Bill Clinton (Moderate Big Government Democrat/socially liberal)
Bush Jr (a Giuliani-type “Big Government Conservative”/social liberal)
Obama (GW Bush the 2nd)
No, the history doesn’t seem to bare your statement out.
It’s even LESS favorable on your deregulation charge.
The fact is, Jimmy Carter initiated the deregulation boom!
President Jimmy Carter initiated the deregulation boom with his widespread efforts in transportation reform/deregulation, and worked with Congressional and civil society leaders to pass the Airline Deregulation Act (October 24, 1978), Staggers Rail Act (signed October 14, 1980), and the Motor Carrier Act of 1980 (signed July 1, 1980).
In finance, the Depository Institutions Deregulation and Monetary Control Act was signed into law in 1980 by President Jimmy Carter on March 31st, 1980. One of the things that the DIDMCA did was that it changed the ceiling on the amount of interest Savings and Loan companies could charge depositors. Late in the administration of President Jimmy Carter, Congress raised the insured deposits in Savings and Loans from 70% to 100% of a person’s deposit and raised the insured amount from $40,000 to $100,000.
These changes led Savings & Loan companies to lend to people they felt were risky and on properties they thought would not maintain their values. That led to speculation and to the number of US federally insured savings and loans in the United States declining from 3,234 to 1,645 in the 1980s. The market share of S&Ls for single family mortgage loans went from 53% in 1975 to 30 % in 1990 and it cost the federal government about $160 billion when our country’s Gross National Product was about one-third of its current value of $1.3 trillion.
In the 1970s Savings and Loan crisis companies experienced a significant outflow from low-interest rate deposits, as interest rates rose to as high as 21% and as depositors moved their money out of the low Savings and Loan rates controlled by Congress to the new high-interest money-market funds. The S&L’S had most of their money tied up in long-term mortgage loans at fixed interest rates, and with market rates rising, these were worth far less than face value. THAT is what created the “S&L Crisis” a few years later.
Suffice to say, “deregulation” DID NOT begin in the 1980s, nor did it stem from Reagan’s Presidency. Much like “deinstitutionalization,” the deregulation you deride is much more a product of the 1970s.
23 is a young boy?