<p>A non-mainstream answer...</p>

<p>As <a href="https://en.wikipedia.org/wiki/Steve_Keen" rel="nofollow noreferrer">Steve Keen</a> is fond of pointing out, mainstream economists (incorrectly) think that the level of private debt has no macroeconomic effects so nobody was looking out for any unusual build up. </p>

<p>Keep in mind the following two facts:</p>

<ol>
<li>Most private debt is in fact loans from banks - in other words
<a href="https://en.wikipedia.org/wiki/Demand_deposit" rel="nofollow noreferrer">demand deposits</a> - which are money. So when private debt rises,
the money supply grows.</li>
<li>House prices are not properly reflected in standard measures of inflation.</li>
</ol>

<p>In the years running up to the crash of 2007/8, central banks were monitoring the level of inflation and adjusting interest rates so as to keep inflation low. There was a housing bubble which meant that house prices were rising relative to the price of everything else (i.e. stuff recorded in inflation measures). The housing boom meant that private debt (i.e. the money supply) was rising at around ten percent a year whilst inflation was running at around only two or three percent. Almost no mainstream economists thought that this was dangerous.</p>

CC BY-SA 4.0
2019-05-09T09:02:26.313Z
2019-05-09T21:45:26.530Z
2019-05-09T21:45:26.530Z
Mick
<p>Most countries hover around 100% of GDP or less in debt. Anything over that is pretty much considered bad. However, it really depends on why the debt increased. If it helps the economy more than the cost of interest than a lot of countries take such a huge amount of debt.</p>

<p>Also, it is harder than you think to repay debt. First, you have to pay interest. Second, funds are zero-sum. So if you use taxes to repay debt then you have to cut funding for something else. Considering the parliamentary system, the coalition may or may not have that much political capital to convince people that "hey, we really need to pay that debt rather than providing healthcare, for instance." People like to pass on the responsibility of repayig to the next generation. Just one of the few reasons why you see countires take more and more debt. </p>

<p>Hope that helps.</p>

CC BY-SA 4.0
2019-05-09T09:50:53.107Z
2019-05-09T09:50:53.107Z
Student
<p>In 2011, household, financial, and business debts stood at 420% of GDP in the UK.</p>

<p>This doesn't sound like a very good state of affairs (am I wrong?).</p>

<p>If this is a negative state of affairs how did the UK arrive at such a position? Presumably someone in a position of governance monitors the macroeconomic state at all times. </p>

<p>If so, why was corrective action not taken at 200% (or whatever)?</p>

CC BY-SA 4.0
2019-05-11T02:47:25.917Z
Asking if this is "a good state of affairs" makes this an opinion question and stackexchange is not meant for that. The political process determines whether this is a good state of affairs.
H2ONaCl
<debt><united-kingdom>
How did the UK become so indebted?
52d6c6af
# How did the UK become so indebted?

(Asked by: username_0 on 2019-05-08)

In 2011, household, financial, and business debts stood at 420% of GDP in the UK.

This doesn't sound like a very good state of affairs (am I wrong?).

If this is a negative state of affairs how did the UK arrive at such a position? Presumably someone in a position of governance monitors the macroeconomic state at all times.

If so, why was corrective action not taken at 200% (or whatever)?

**Tags:** debt, united-kingdom
> **Comments:**
> **username_1**: Asking if this is "a good state of affairs" makes this an opinion question and stackexchange is not meant for that. The political process determines whether this is a good state of affairs.  

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## 2 answers

### Answer by username_2 on 2019-05-09. Score: 0 | Accepted answer

A non-mainstream answer...

As [Steve Keen](https://en.wikipedia.org/wiki/Steve_Keen) is fond of pointing out, mainstream economists (incorrectly) think that the level of private debt has no macroeconomic effects so nobody was looking out for any unusual build up.

Keep in mind the following two facts:

1. Most private debt is in fact loans from banks - in other words
   [demand deposits](https://en.wikipedia.org/wiki/Demand_deposit) - which are money. So when private debt rises,
   the money supply grows.
2. House prices are not properly reflected in standard measures of inflation.

In the years running up to the crash of 2007/8, central banks were monitoring the level of inflation and adjusting interest rates so as to keep inflation low. There was a housing bubble which meant that house prices were rising relative to the price of everything else (i.e. stuff recorded in inflation measures). The housing boom meant that private debt (i.e. the money supply) was rising at around ten percent a year whilst inflation was running at around only two or three percent. Almost no mainstream economists thought that this was dangerous.


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### Answer by username_3 on 2019-05-09. Score: 1

Most countries hover around 100% of GDP or less in debt. Anything over that is pretty much considered bad. However, it really depends on why the debt increased. If it helps the economy more than the cost of interest than a lot of countries take such a huge amount of debt.

Also, it is harder than you think to repay debt. First, you have to pay interest. Second, funds are zero-sum. So if you use taxes to repay debt then you have to cut funding for something else. Considering the parliamentary system, the coalition may or may not have that much political capital to convince people that "hey, we really need to pay that debt rather than providing healthcare, for instance." People like to pass on the responsibility of repayig to the next generation. Just one of the few reasons why you see countires take more and more debt.

Hope that helps.


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