(c) Some outside event, such as a major failure, brought the thing to a head, but the signs were visible many months, and in some cases years, in advance.(d) None was ever quite like the last, so that the public was always fooled thereby. (f) Credit is credit, whether non-self-liquidating or self-liquidating.A high-debt situation becomes unsustainable when the rate of economic growth falls beneath the prevailing rate of interest on money owed and creditors refuse to underwrite the interest payments with more credit.
At some point, a rising debt level requires so much energy to sustain - in terms of meeting interest payments, monitoring credit ratings, chasing delinquent borrowers and writing off bad loans - that it slows overall economic performance.
Austrian economists Ludwig von Mises and Friedrich Hayek warned of the consequences of credit expansion, as have a handful of other economists, who today are mostly ignored.
Bank credit and Elliott wave expert Hamilton Bolton, in a 1957 letter, summarized his observations this way: In reading a history of major depressions in the U. from 1830 on, I was impressed with the following: (a) All were set off by a deflation of excess credit. (b) Sometimes the excess-of-credit situation seemed to last years before the bubble broke.
The inflation of the 1970s induced dramatic price rises in gold, silver and commodities.
The inflation of the 1980s and 1990s induced dramatic price rises in stock certificates and real estate.