Private Sector Cutting Debt…Uncle Sam? Not So Much.

from the NYT

from the NYT

Floyd Norris shows us this morning that while virtually every facet of the private sector in America has been scaling back on debt, the Federal Government has rushed headlong into the breach to fill that void.

From the New York Times:

Rather than crowding out the private sector, Uncle Sam is now standing in for it. Much of the government borrowing went to investments in financial institutions needed to keep them alive. Other hundreds of billions went to a variety of programs aimed at stimulating the private economy, including programs that effectively had the government pick up part of the cost for some home buyers and some auto buyers.

The government is taking on debt on behalf of its newly adopted problem child, the financial system.  And in relation to the rest of the economy, here’s a little tidbit to give you an idea of the scale, historically:

Twenty years ago, nonfinancial businesses in the United States borrowed $1.70 for every dollar borrowed by the financial sector, government-guaranteed or not. Now the figure is 68 cents.

Not exactly the kind of growth statistic we’re looking for…

Source:

A Rich Uncle Picking Up The Tab (NYT)

What's been said:

Discussions found on the web
  1. BDO commented on Sep 27

    When we [consumers/citizens] learn to stay away from debt, we will start hiring representatives to do the same on the national level. Until then, we have spenders in Congress, because in 2008 we [consumers/citizens] were still spending.

  2. BDO commented on Sep 27

    When we [consumers/citizens] learn to stay away from debt, we will start hiring representatives to do the same on the national level. Until then, we have spenders in Congress, because in 2008 we [consumers/citizens] were still spending.