Online published on 21 March, 2018.
This article proposes a model to explain the declining efficiency of monetary policy and questions the general assumption that large-scale credit stimulates economic development, since indebtedness in due course cyclically brings about negative growth rates. However technological innovation allows the economy to grow faster through lending but only up to a certain critical value of debt, beyond which the necessity to repay loans triggers a long recession after an initial boost. Hence, providing new credit to an over-indebted economy will not bring about lasting new growth but rather will eventually result in a major depression. The paper points out that the US economy, among others, is experiencing such a situation. Its growth has long been negative in real terms despite government efforts to mask figures by manipulating statistical analysis.
