Replacing Consumerism

Is that true if credit/debt is also added as fuel to the fire? If consumption is based on non-existent money how does that work?Is not a large part of the current problem with western economies that, as wages have stagnated and the richest have got exponentially richer, standards of living have kept pace for the majority on the basis of unsustainable debt?Not only are the wealthiest paying their workers less, giving them less health and pension benefits etc. - They are also lending them money to sustain what quality of life they do have. Not just wage slavery but debt slavery too.I'm getting drunk and radical.....

The bank loans me money (via credit cards or whatever) but where do the banks get that money from? Some is from the savings of others. I get that. But does ALL of the money banks loan out add-up to the total they hold in deposits? I'm sure it doesn't. I'm sure it far exceeds what they actually hold. So what is to stop banks lending money they don't really have? And isn't this part of the whole problem with busted banks now requiring re-capitalisation because they effectively lent money that they didn't have? Sure. But however you look at it there is a debt crisis in the Western world. How did that come about?I'm genuinely asking here rather than seeking to make some point.

Oh I'm well aware of the hyperbolic claims regarding public debt and the political capital being made on the back of falsehoods regarding that. The debt crisis I was referring to was the private debt crisis of banks and individuals.Your excellent reply Message 43 goes a long way to answering the question I was intending to ask. Good stuff.

Isn't that because people were spending money on the basis of believing that the assets they owned would be worth more than they have ended up being worth? Classic Keynesianism. Jobs. Growth. Deficits and debts as a proportion of GDP will fall as a result of growth rather than austerity. I completely agree. But in a global economy can any nation (even one as economically powerful as the US) do this if everyone else they sell things to is engaging in self-flagellating austerity? We do print our own money. The bank of England has been engaging in vast swathes of quantitive easing recently. But they give it to the banks who horde it and won't lend.To increase Keynesian style demand the money would very arguably be better placed in the hands of the people. The last round of quantitative easing was equivalent to giving each person in the UK 3,500. Clegg (the Liberal democrat leader and junior coalition partner) won't thank you for describing it as his budget. Osborne is the conservative chancellor. It's his budget.And - No austerity isn't working. Unemployment spiraling. Growth non-existent and recession a real possibility. And as a result little dent is being made in the debt or deficit despite all the pain of massive cuts.As Keynes predicts......

I don't think I am. At least I wasn't intending to. I am asking genuine questions and really appreciating your informative answers. I thought your recap of the cause of the financial crisis was fantastic. I am entirely with you on the Keynesian strategy. I totally get that there is a great deal of misinformation about the nature and size of public (i.e. government debt) that is being used to promote ideologically motivated self defeating jihads on public services and expenditure.But I was/am under the impression that there is indeed a significant debt problem of one sort or another. Whether it is banks that ultimately made bad loans, governments that are being forced to bailout these banks or people that have racked up loans on assets that aren't worth as much as they thought and generally used debt as a means of countering falling or stagnating incomes.....it seems that those of all political persuasions agree that there is a debt issue to be solved.Are you saying that this just isn't the case?

I certainly agree that demand resulting in growth and employment is (or should be) the answer to much of this. The US, the UK and the Euro currency zone all embarking on mass austerity simultaneously seems like a recipe for absolute paradox-of-thrift disaster on a global scale.But I don’t think you can just dismiss the notion that debt is a major factor too. Even if it isn’t a factor in quite the way many have (successfully) sold it to people as an excuse to pursue their ideological dreams in our respective countries.There has been an asset (i.e. housing) bubble in many Western countries. And it has burst. This has left many banks deeply exposed to bad loans. And this in turn has led to national governments paying out eye watering sums to prop up the banking system. The whole situation has exposed significant problems with the Euro currency countries. Greece, Ireland, Portugal, Spain and even Italy are in genuine danger of defaulting on their increasingly unsustainable debts. If any of these nations do default various interdependent banks will go under (or require even bigger bailouts). The entire global economy seems to be continually teetering on the edge of somebody defaulting and causing a complete collapse. So I don’t see how debt isn’t a major issue here.Is my understanding as laid out above wrong in your view? If debt isn’t an issue why are we continually talking about countries defaulting on their debts? Can this scenario be averted purely by tackling demand?