The Science of Predicting the Next Financial Crisis | The Most Revolutionary Act

In contrast, Keenn’s economic modeling is based on the inconvenient reality that most mainstream economists choose to ignore – that private banks create 97-98% (see  An IMF Proposal to Strip Banks of Their Power to Create Money) of our money out of thin air when they issue loans. Keen also criticizes conventional economists for failing to track private debt (corporate, small business and household debt – which includes mortgage, credit card and student loan debt).

Based on careful research, Keen reveals how all recent recessions were triggered by a rise in private debt above 150% GDP* – preceded by five years of private debt exceeding 10% of GDP. The recession occurs when various economic stresses cause banks to reduce the amount of credit they issue (ie the amount of money they create).

**The US private debt to GDP ration reached 210% at the end of 2017 (US private debt to GDP ratio) and continues to increase.

via The Science of Predicting the Next Financial Crisis | The Most Revolutionary Act