Consumers still paying off debts

So we don't Shop Till We Drop. 2 screenshots from @statisticsons show (a) sales vol flat for several yrs twitter.com/primeeconomics…
— Prime Economics (@primeeconomics) May 22, 2013

Update on Debt

Found a new source on UK total debt on Economics Help. Which includes this graph:

This is sort of helpful and sort of not. Help in that it shows total debt rose steeply during the period covered by the graph (could do with a but more). But's it's hard to see what was going on in the early 1990's for instance where we have a couple of little peaks. However, ca. 1994 debt started rising from about 240% of GDP and carried on until it peaked in ca. 2009 since when it has hovered around 500% of GDP.

Note that government debt only really started to rise around 2008 after the crisis hit. Before the crisis UK had low government borrowing. Actually I think Gordon Brown did start to run a deficit before the crash because he believed in the "end of boom and bust". The lack of vertical scale and the fat line on this graph obscures some detail.

However it doesn't change the overall picture. Business and households are in two main positions:

1. too much debt and busy paying it off.
2. saving money while waiting for better investment opportunities

Richard Koo at INET

This video shows Richard Koo debating Ken Rogoff at the inaugural INET conference in 2010. Richard Koo makes a great deal of sense but he has yet to find mainstream support. Rogoff's ideas about debt have since been discredited by a graduate student. 

Koo's point that in a balance sheet recession things are different - our attitude to government debt must change. "The is a different disease!" His point is that with private debt levels so high there will be a continuing impact on demand - because the private sector are either paying off debt or saving, government must take up the slack to keep the economy going. Clearly austerity is doing the opposite and prolonging the recession.

Rogoff was one of the main proponents of focussing on government debt and cutting spending to bring it down. Now he and his colleague Carmen Reinhart are said to be "Furiously Away From Austerity Movement."