On the 18th of March, the Bank for International Settlements released a new dataset that compiles figures on Private sector borrowing in 40 different countries. There's a webpage about it here. It's an impressive set of numbers that can be downloaded as an Excel file here. And there's a document that goes with the data called "How much does the private sector really borrow - a new database for total credit to the private non-financial sector".
I took the numbers for the US, the UK and the Eurozone countries for which figures are available, and plotted how the numbers have increased over the years.
For the US, where the figures go back to 1952, you can see that the increases has been totally spectacular. The level of debt has doubled in the space of 9 years to reach a peak of £25.2 trillion at the end of 2008. It then dropped a bit and has since increased again to reach $25.0 trillion at the end of the third quarter 2012.
For 12 of the Eurozone countries, where the figures go back to 1971, you can see that again it only took 9 years to double the amount of debt, reaching an impressive €14.3 trillion at the end of 2008. Since then, the amount of debt has increased more slowly to reach a total of €15.15 trillion at the end of the 2nd quarter 2012 (15.69 trillion if all 17 countries are included).
Finally, for the UK, where the numbers go back to 1963, it's a similar story except that it only took 7 years to double the amount of private debt in the run up to the peak of £3.18 trillion at the end of 2008. Since then, it has been wobbling around, with the latest value of £3.12 at the end of the third quarter 2012.
Impressive. And when you think that all that debt has interest charges attached, is it any wonder that the entire global economy is on its knees. Lets be generous and assume that this debt is only being charged compound interest at 5% per year. Even on that figure, it means that in the US, about $1.2 trillion is being paid out by the private sector (households and companies) to the financial system every year. In the Eurozone, the figure will be around €800 billion a year. And in the UK, we can assume that the number will be £150 billion.
And that's without taking into account that a lot of the private debt is on credit cards that will happily charge up to 20%. And some of it will be debts toward payday loan companies that can sometimes charge over 14,000% interest.
It goes without saying that this insanity has to stop. Remember that the banks that lend the "money" to the private sector don't actually have the money to lend. They create it out of thin air, and then have the nerve to charge interest.
But they only do that because we let them. Money creation should be done Debt-Free by central banks. If the system is not changed, then those three graphs will just keep on going up and up. As will the graphs for the other thirty odd countries whose private sector debt levels are detailed in the BIS dataset. Nobody is going to get out of debt. Not individuals. Not companies. And not even governments.
It is time to change the system.