State Debt Since 2008 Has Exploded — and Hovers over us Like the Sword of Damocles

But it was not just the real economy that got into trouble. The bursting of the real estate bubble caused extreme losses for the banks. But these losses were also only partly recognized, and banks were saved all over the world by their respective national governments. As a result, the bad debt was transferred from the banks to their governments, but this does not mean that these debts have disappeared. Or do you believe that a hot potato just disappears when it is handed off? Someone has it. Ultimately it is all of us who have it, as will become obvious sooner or later. In the meantime, additional bad state debt has been added: for example through the increase in “social expenditures” in the form of support for the unemployed and through numerous economic programs meant to jump start the economy. State debt since 2008 has exploded — and hovers over us like the Sword of Damocles.

In other words: The losses stemming from malinvestments were to a large part just shifted to the nation-states and to the balance sheets of the central banks. Neither the original investors nor the bank shareholders nor the bank creditors nor the holders of government bonds have yet written off the losses. The bad debt just keeps piling up in the form of national debt. But shifting around bad debts does not bring back lost wealth. The debts remain. When and how do you think the debt will catch up to us?

—Andreas Marquart and Philipp Bagus, Blind Robbery! How the Fed, Banks and Government Steal Our Money (Munich: FinanzBuch Verlag, 2016), e-book.