"Nothing is the miracle it appears to be"
- Simon Stevin
In 1694 the Bank of England was formed. Immediately, the amount of public debt began to proliferate. Banks sprang up across the land. By 1743, the English economic system was booming. 95% of England's wealth was held by 2% of the population. The key driver of both the economy and the concentration of wealth was credit. By 1763 "British Magazine" opined in an article on the good times that ".... in a few years we shall probably have no common people at all."
250 years later, the importance of robust banks and credit growth remain key determinants to prosperity. Both are anemic. More importantly, the national mood toward both is negative. Confidence in what amounts to a faith based system is a necessary intangible to a credit expansion. The fragile repair that was being accomplished in the US has been damaged by the Euro Zone accident.
The vilification of the banks by both regulators and the public will have to cease if growth is the desired goal. The disparaging of debt and embrace of austerity is foolishness. In 1400, the city of Florence (a hotbed of growth) took in 1,200,00 Florins. Total public debt was an astonishing 7.5x the commercial wealth of the City. Debt is good. There will be more of it.