Font: EL ROTO | EL PAÍS.
Private debt in % of GDP – consolidated – annual data
The private sector debt is the stock of liabilities held by the sectors Non-Financial corporations (S.11) and Households and Non-Profit institutions serving households (S.14_S.15). The instruments that are taken into account to compile private sector debt are Securities other than shares (F.3) and Loans (F.4), that is, no other instruments are added to calculate the private sector debt. Definitions regarding sectors and instruments are based on the ESA 95. Data are expressed in million euros and presented in consolidated terms, i.e. data do not take into account transactions within the same sector.
So what really caused the crisis?
There was a big build-up of debts in Spain and Italy before 2008, but it had nothing to do with governments. Instead it was the private sector – companies and mortgage borrowers – who were taking out loans. Interest rates had fallen to unprecedented lows in southern European countries when they joined the euro. And that encouraged a debt-fuelled boom.
Good news for Germany…
All that debt helped finance more and more imports by Spain, Italy and even France. Meanwhile, Germany became an export power-house after the eurozone was set up in 1999, selling far more to the rest of the world (including southern Europeans) than it was buying as imports. That meant Germany was earning a lot of surplus cash on its exports. And guess what – most of that cash ended up being lent to southern Europe….
As the French economist Jacques Rueff once warned, the dollar regime creates an international balance of payments system that functions like a game of marbles in which, after each round, ‘the winners return their marbles to the losers’, as Washington’s creditors invest the dollars they receive for goods sold to the us in dollar-denominated instruments in order to keep their own currencies competitive, while the us could simply print more dollars to pay its bills.18 In successive decades the Germans, Japanese and Chinese learned this lesson. Its effect was to boost credit creation and mask the weakening of the us economy.
Font: The Economist