Crowding Out and Other Things

I still, for the life of me, don't understand why the term "crowding out" hasn't returned to popularity. In the 1970s it was a very popular term which meant that the U.S. government's use of debt was crowding private economic players out of the market.

This chart comes from a fabulous collection of charts at Business Insider - 50 Important Charts. They cover a lot of topics but they make for a very useful snapshot of our world at the moment.

In the one I've included directly, what you see is the result of increased debt financing of the government. Above a certain level of public debt, each additional borrowed dollar produces less and less output. Or to put it another way, so much money goes to servicing the debt that less and less true investment takes place. Or to put it another way, when the government is hoovering up all the national debt capacity, then more efficient and productive private players are crowded out ... and so productivity declines.

A sad tale but true.