My friend Andrew Cockburn is on a roll.  One week after his brilliant article on IEDs in Harpers, he has produced another hard-hitting tubesteak, this time in Counterpunch.  Andrew's targets are the Banksters, whose looting continues to push the middle class into poverty and the lower income classes into a kind of debt servitude that is reminiscent of that imposed by company stores in the West Virginia coal towns in what we had hoped was a bygone era.

Andrew's essay is important, because the problem he is describing exists  against the backdrop of the Great Recession, which now, three years after the banking system started to collapse, may be on the cusp of a full blown debt deflation, triggered by another, even more catastrophic banking collapse.   My introductory comments are intended to help you understand that magnitude of that danger that Andrew is describing.

The following charts (Figures 1 & 2), based on the most recent data released by the Federal Reserve,

portray ratio of debt to gross domestic product over time.  Figure 1 shows how the cumulative debt changed in the entire system, with debt expressed as a percentage of the GDP produced by the economy. The debt ratio for the entire economy should not be thought of as an absolute measure of debt burden but as an indexof that burden, and is an indicator of the comparative pressure of that debt regardless of the overall size of the economy.[1]  Thus, one can compare

changes in earlier years to those in later years.  Figure 2 plots the sector burdens separately for the components in the private sector (note: since Federal Debt is arranged in bottom position in Figure 1 it is also the same shape that would be plotted in Figure 2; other categories, like state and local debt have been ignored because over time their ratio changes have not been significant enough to the alter the pattern in the figures).  What do these figures tell us?

Banks on the Brink