Comment Re:Software is the wrong villian here. (Score 1) 307
Money isn't a commodity like gold. When a bank issues a loan, they create an asset and liability at the same time. When you pay a loan back, the asset and liability are cancelled out. Most of our spending power is based on ledger records in a bank's double entry book-keeping system. But as an entire country, we haven't been paying back our loans at all. Each year we've borrowed more than we've repaid, even when you take inflation into account.
If you're running a business, your income is based on what your customers spend from their income plus new debt. Therefore the growth in your income is based on the growth of your customers income and the *acceleration* of their debt. If the acceleration of debt slows down and turns negative, even if the velocity of debt is still positive, your flow of income will reduce. If income is growing, you'll probably hire more people. If income falls you'll be forced to let people go.
So if we can extrapolate this to an entire economy, we should see a strong correlation between employment and the acceleration of debt. This, IMHO is the smoking gun.
For similar reasons I'd expect to see similar relationships between mortgage acceleration and house prices, or margin lending and share prices.
Private debt drives the economy. And yet economists have convinced themselves and us that we can safely ignore the role of banks debt and money. This situation is absolutely insane.