(Source: Stock Tickle blog from Business Insider)
A few observations.
The current increase in debt due to the Credit Crunch has been about 110% of GDP. The jump after 1918 was about the same. Financially, the cost of the Credit Crunch has therefore been about the same as the that of the First World War.
Notice that debt went down during the 1980s recession - Thatcher's government being anti-Keynesian im their belief that cutting spending would be more effective than spending more.
The 1929 onwards recession is interesting. At first, debt went down following the Wall Street Crash, as pre-Keynesian governments cut their spending. By the late 1930s, this trend was reversed as new policies were introduced, as well as increased spending on rearmanent before WW2.
The "Golden Age" of the UK economy from the 1950s to mid 1970s saw a consistent fall in national debt as governments used favourable economic situations in order to pay back debt. The "Nice Decade" of Blair and Brown did not see any similar reduction in borrowing.
As I was reading earlier today, we should all remember that recession spending by governments is only one half of Keynesian fiscal policy; building up savings in good times is the other.
Oh dear, not much summer fun in this post. Here's a video of a fight in the Taiwan parliament. When I lived there, there seemed to one every week...... good to see democracy being taken so seriously.
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