Neither a borrower nor a lender be;/ For loan oft loses both itself and friend,/ And borrowing dulls the edge of husbandry. – William Shakespeare
You'd think we'd learn. Those lessons from prudent parents of a different generation are long forgotten, it would seem. The lessons of 2008, of credit unlimited, of debt swaps and subprime mortgages, never learned. "Blessed are the young," Herbert Hoover once observed in a very different age, " for they shall inherit the national debt".
We’re still mainlining, albeit unwillingly, dependent more than ever, on that most potent of addictions , easy money, debt. Global debt has risen by some €50 trillion (€50,000,000,000,000) – government debt by €22 trillion – since the 2007 onset of the financial crisis, to close on €175 trillion. Total debt as a share of GDP stood at 286 per cent in the second quarter of 2014 compared with 269 per cent in the fourth quarter of 2007.
Among the most dramatic and alarming rises is China whose debt to GDP ratio is up 83 per cent in the period . China's total debt has nearly quadrupled over the same period to €25 trillion by mid-2014, fuelled by property sales and shadow banking .
So much for hopes that the experience of the crash might encourage "deleveraging" to safer levels of debt. The figures from a study by the McKinsey and Global Institute of debt in 47 countries found that government debt in 10 of them exceeds 100 per cent (Ireland included).
“Overall debt relative to gross domestic product is now higher in most nations than it was before the crisis,” McKinsey reports. “Higher levels of debt pose questions about financial stability.” To put it mildly.
The picture on household debt is not much better, although exceptionally both Ireland and the US show significant declines in the period. Countries that McKinsey warns face “potential vulnerabilities” because of high household debt include the Netherlands, South Korea, Canada, Sweden, Australia, Malaysia and Thailand.