The Financialization Of American Business: How Cheap Debt Fuels The Bubble

David Stockman reports:

Monetary central planning is failing to achieve Keynesian “escape velocity” because it has deeply impaired the engines of capitalist enterprise. Nowhere is this more apparent than in the grotesque financialization of American business that has occurred since the 1980s. As usual, the deformation is rooted in the massive growth of debt carried by non-financial businesses.

As shown below, business debt has increased by nearly 8X since 1982 or at almost double the growth rate of GDP. Accordingly, the ratio of total business debt to GDP has risen from 53% to 81% over the last 32 years.


Needless to say, this debt tsunami was not devoted to investment in productive assets and therefore future growth and productivity. Especially since central bank money printing came to dominate the financial markets after the mid-1990s, the rate of real net business investment in the US economy has exhibited an unprecedented decline. And in this context it is important to emphasize that the appropriate metric is net investment after current period consumption of capital is accounted for, not gross CapEx as is measured in the GDP accounts and touted by Wall Street economists.

An article well worth your time.