Summary
4 - Total credit directed to households and non-profit companies serving households (% of GDP)
5 - Total credit directed to non-financial companies (% of GDP)
6 - Structures and dynamics in the distribution of credit / indebtedness
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In the first part of this analysis, the total credit directed to the non-financial sector is accompanied by an approach on one of its installments, the public sector. In this second part, we will consider two other parts of this non-financial sector - households (including non-profit entities) and non-financial companies. Also and, as before, taking into account that all quantities are measured in terms of the percentage of GDP for each year.
Below is a schematic of the framework for the various sectors of economic activity with the data released by the Bank of International Settlements (BIS)
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Total - non-financial sector |
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Public sector |
Families and businesses are in profit |
Companies |
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Non-financial private |
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In today's capitalism, it is necessary to promote increased availability of capital, since economic activity never generates sufficient income to satisfy the accumulation felt as necessary; hence the drive for economic growth that did not exist before Keynes. In this context, the aim is to increase the "invested" capital, without quantitative limitations, speculating, obtaining favors from the State, obtaining credit from the financial market (banks, stock exchange, speculation) or, making war if necessary.
On the other hand, some pressure is placed on those who live on income from consumption, largely of useless or harmful goods or services, despite the precariousness of that income. And, the satisfaction of this pressure requires the use of credit, especially in the very long term, with the financial system.
Public management itself does not escape this drive, as each gang in power needs to maintain order and obedience, domesticating police, military and, civil servants; how it needs to showcase its work to win the next elections and please the businessmen who finance the corruption of governments and political classes in general.
The way out of this common dilemma is recourse to indebtedness, something that has become obsessive and whose solution is presented by the thin capital that stands apart from the so-called "real" economy; and this, the traditional capitalists, producers of non - financial goods and services, the state apparatus, in charge of the convenient redistribution of fiscal puncture; and yet, the ordinary people, the families, the helots, whose gentleness is essential for the continuation of the capitalist system and the regimes of market "democracy", with variable degrees of brutality.
4 - Total credit directed to households and non-profit companies serving households (% of GDP)
There, in the first chart below inserted various types of credit evolution of granted or, if you prefer, the level of household debt in the last 25 years, for the chosen countries.
It is quite clear that there are two periods. The first, which ends around 2009, of a large expansion of the weight of household debt in GDP; and the second, until the present moment, in which the weight of indebtedness has stabilized.
For all euro countries as a whole, these credits grew until 2009, then retreated to the present day, clearly abandoning the high upward trend seen until the mid-decade crisis. In Britain and the Iberian countries, the household debt is very sharp, with strong growth to the discharge of the financial crisis declining thereafter, except Great Britain that keeps stable the debt burden of households in past few years.
Portugal, Spain and, Greece have large growth loans to households, and that doubles, substantially in about ten years, with Greece, a lower level; euphoria in the Iberian countries peaked in 2009, decreasing until now to weight values in GDP close to those recorded twenty years before. In the case of Greece, the peak is reached in 2013 but the drop is not as sudden as in Portugal or Spain. Thus, excluding Great Britain, there is an approximation of the degree of family indebtedness in the latter, among euro countries, for indicators close to the set.
France shows a great regularity in the growth of household indebtedness and Italy shows the lowest levels of family indebtedness, compared to GDP and, n a stable plan around 40% of GDP, since 2008.
Germany shows a clear dissimilarity compared to the other countries considered. The weight of German family debts - the highest at the turn of the century - evolves until reaching the lowest coefficient, among the countries considered, with the except for Italy; a very regular evolution, with a decreasing tendency.
Synthetically, there is a clear reduction, over time, of the differences between the degree of household indebtedness to the euro countries, if Italy is excluded.
When approaching the situation for large aggregates of countries - eurozone and G20, on the one hand, and the two world colossuses - China and the USA, on the other - there is a great similarity (see graph below) between the two first aggregates, with indicators close to 60% of GDP since 2006.
As for the USA, family indebtedness had a dimension equivalent to the value of GDP in the period 2007/2009, at the height of the financial crisis known as that of subprimes. What was verified in the period reflects in negative, the debt assumption of euphoria by families with limited resources but tricked into debt increases, taking into consideration the high valuation of their homes. As the real estate lost value, unlike the debt, the execution of the mortgages led millions of people without health coverage (at the time of the enormous neglect of Trump as a political pandemic manager) and homeless, sleeping on the streets and under bridges. American Dream seems to be renaming itself American Nightmare, in the face of Xi's smile that will be convinced of the possibility of capitalism without a hangover, protected by a new Great Wall; however, this did not prevent the Mongols from entering, let alone looting and violence carried out by barbarians (designation officially given to Europeans).
As for China, the weight in GDP of household indebtedness has sixfold in fourteen years (2006-2020), which is something extraordinary. Although it is a country with 1300 M people (two and a half times the population of the EU), it is worth asking whether a capitalist economy can maintain this rise even within the framework of tentative and intractable political power; or, if the country's export power, even if it depends on energy and investments a little bit by all parties, can be maintained; what changes will arise from economic co-optation in the Western Pacific area (among other areas of penetration), with the Regional Comprehensive Economic Partnership. The United States' strategic retreat in the creation of the Trans-Pacific Partnership that aimed, precisely, to leave China out, should be considered a gift to China. In return, the US has strengthened its military potential in Taiwan…
5 - Total credit directed to non-financial companies (% of GDP)
It is considered here as loans to non-financial companies, those coming from bank financing, partners or private loans, operations the stock exchange or, to public entities. As can be seen in the following graph, there are varying degrees of indebtedness taking GDP as a dynamic element of comparison.
France shows steady growth in corporate indebtedness and, always at a very high level, which reaches 155% of GDP in March of the current year; and, without a hitch in the face of the financial crisis. A regularity that, being verified with high levels of credit dependence, did not change in the trajectory during the period of financial turbulence centered in the middle of the last decade.
The Iberian countries show a huge increase in indebtedness compared to the amount of GDP, until the period when the crisis in their financial sectors is revealed, along with the deterioration of public accounts, unemployment and, the fall in activity levels. However, there is a two-year gap between the two countries concerning the turning point (Spain 2010 and Portugal, 2012). The enormous growth in indebtedness did not lead to a reinforcement of the productive capacity, nor of the purchasing power of the population, but, increment or public and private debt, as well as unemployment levels.
The enormous growth in debt resulted in a loss of purchasing power for the population and not in improvements in the quality of life. In this context, the responsibilities of the political classes are immense and it is surprisingly their disastrous performance has not led to a renewal of it, with deep changes in the model of representation. In Spain, the crisis - financial, unemployment and, evictions - generated a popular movement ( 15 M ) in 2011 as well as a change in political chess, with the emergence of Ciudadanos, Vox and, Podemos let us add that the renewed movement for the separation of Catalonia or the discredit of the monarchy were elements that formally changed the political structure but not, its oligarchic and corrupt substance. In Portugal, the traditional pentapartito, continued with more or less “lonely tenors” in the Republic Assembly as well as the debt crisis or bank fraud , with deviant political provocations such as “ Que Se Lixe a Troika”[1] or “ Geração à Rasca”[2], created to avoid any durable and effective contestation that would threaten the functionalism of the parliamentary “ left ”.
In Spain, indebtedness, in terms of GDP, almost triples in a short period of twelve years (1998/2010) while GDP itself only doubles; on the other hand, between 2010/2016 the fall in indebtedness corresponds to a period of GDP stagnation. In Portugal, indebtedness doubles compared to GDP in a slightly more extended period, of fourteen years, while the product itself stagnated in 2007/2015.
Italy and Greece correspond to the same profile mentioned above for Spain and Portugal but with much lower peaks and spaced over time, with structurally lower levels of indebtedness. For their part, Germany and Great Britain boast great regularity and much lower debt weights for non-financial companies than in France, Spain or, Portugal.
Regarding the large aggregates of countries and for the two largest powers, the USA constitutes the aggregate where the indebtedness of non-financial companies is lowest, even if with a slow rise, it reaches 78% of GDP last March.
In a general context of growth in the use of credit by non-financial companies, the regularity observed for the G20 and the Eurozone should be highlighted. There is a clear contrast with China, for which there is a strong upward trend until 2015, passing through the breaks of 2007/08 and 2009/11; in recent years, however, the use of credit by Chinese non-financial companies appears to be in restraint.
6 - Structures and dynamics in the distribution of credit/indebtedness
At this point, we intend to show, in summary, the changes regarding the main of the three major areas of credit recipients; and the duration of that top position. , for each country. At the same time, we show the average distribution of credit granted for each of the economic and social segments, also for each of the countries considered and, for all (or part) of the period to which the data refer.
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Main destinations for credit to non-financial institutions |
Average distribution of credit by institutional sectors (%) |
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Families |
State |
Companies |
Families |
State |
Companies |
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Germany |
1998/2004 |
2005 -> |
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3 2.4 |
3 7.3 |
30.3 |
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Spain |
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1995/1999 |
2000/2014 |
26.3 |
32.4 |
41.2 |
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2015 -> |
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France |
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1998 -> |
18.8 |
33.4 |
48.0 |
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Italy |
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1999 -> |
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15.5 |
54.0 |
30.5 |
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Greece |
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1999 -> |
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18.2 |
58.7 |
23.7 |
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Portugal |
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2014 -> |
1998/2013 |
27.2 |
34.0 |
38.8 |
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Z. Euro |
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1999 and 2014 |
2000/2013 |
24.2 |
35.6 |
40.1 |
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China |
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2006 -> |
1 6.1 |
19.0 |
64.8 |
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USA |
1996/2010 |
1995/96 |
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3 6.0 |
34.3 |
29.7 |
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2011 -> |
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From the table above, are extracted the following notes related to recipients of credit or, assumed debt :
· Germany shows that this situation fell on families until the first decade of this century, being replaced by the State at the beginning of the century following the Hartz reforms. The German state in 2002 had a corresponding debt at 61.8% of GDP that reached to 70.2% in 2005, never retreating to levels seen around the turn of the century;
In the case of the USA, families absorbed the largest share of indebtedness until the subprime crisis put the State as the main debtor as of 2011. In 2007, the US State had a debt corresponding to 60.7% of GDP, an amount that increases regularly to 102.4% in 2012 and 111.1% in March. By contrast, household debt corresponding to 98.5% of GDP in 2007, has been declining, since up to 75.2% in March last;
· France and China have always revealed that business data is the main sector with debt levels compared to other groups socio-economic, families. and, States. Among the countries considered here, they are the ones where the weight of companies is highest, in total debt.
In China, the preponderance of credit obtained by companies reveals the country's industrial and commercial strength, especially in the area of exports; and that, contrary to typical state capitalism, economic activity develops with autonomy but obviously under the control state and the party. Note also the low share of indebtedness related to families, much lower than the so-called western countries.
· Spain and Portugal, as well as the whole of the Eurozone, have, roughly, as a standard for the whole period, a predominance of the debt generated by the companies ... but from the beginning of the century until 2013/14, when the situation alter or; from then on, and in response to the financial crisis and real estate, is the state that presents itself as the principal debtor, as the great stabilizer, following the chela crisis that generated income drop, unemployment, reduced purchasing power and, strong growth public debt.
· In Greece and Italy, throughout the period, the state is the principal debtor, with indicators well above the sum of two other socio-economic groups.
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