Capitalism and irony

Private debt has long been a problem. The textbook I used when I took Econ 101 (McConnell Economics, 1975) says

Although the size and growth of public debt are looked upon with awe and alarm, private debt has grown much faster. Private and public debt were of about equal size in 1947. But private debt has grown much faster and is now over three times as large -- about $1,350 billion, compared with $470 billion -- as the public debt.

And that's from the 1975 edition. McConnell adds:

If you insist upon worrying about debt, you will do well to concern yourself with private rather than public indebtedness.

In the January/February 1993 issue of the Federal Reserve Bank of St. Louis Review, Keith M. Carlson's article on debt, the opening sentence:

Early last year, a survey of the 50 Blue Chip forecasters indicated that the most important factor influencing the outlook for near-term economic growth in the United States was the debt burden carried by governments, households and businesses.

Okay, maybe not only private debt. But not only public debt, either. And Carlson's article is from the early 1990s.


During and immediately after the Global Financial Crisis and Great Recession, concern about private debt was sprouting like green shoots:

• "The global economy cannot return to health until households have worked off at least part of their excess debt. So far they have made little progress." -- The Secret Economist, 8 May 2009
• "Thirty years of surging growth in private sector leverage, in the balance sheets of the financial sector and in notional profitability of the financial sector in the US and other high-income countries has ended in calamity." -- Martin Wolf, 23 December 2009
• "My operating assumption is that the main current problem with the US economy is Too Much Debt in the private sector, and that all will not be well until both the household and financial sectors have deleveraged back down at least to something like the levels of the 1990s (at a rough guess). On the pace so far, it appears likely that that will take at least a decade." -- Stuart Staniford, 3 July 2010
• "I think it’s fair to say that a majority of economists believe that excessive private debt played a key role in getting us into this economic mess, and is playing a key role in preventing us from getting out." -- Paul Krugman, 25 September 2010

As recently as 2016, Richard Vague was saying

"Both private debt and government debt matter, and both will be discussed here, but of these two, it is private debt that has the larger and more direct impact on economic outcomes... When too high, private debt becomes a drag on economic growth."

But at long last, it seems capitalism has found a solution to the problem of private debt. At BNY Mellon for example we read that

The post-crisis era has seen private debt become an established asset class in its own right, matching the needs of yield-seeking institutional investors and companies looking for capital to grow.

"Private debt" is no longer a problem. They redefined it. Think I'm kidding? See for yourself:

So it goes.