Capitalistic Renaissance 9: What happened?
Here is where we went wrong in relying primarily on debt by governments and consumers to drive demand. We did not recognize the long-term debt consequences of hybrid public corporations using their unlimited ability to create equity by granting free credit to consumers on fixed labor income.
This paper has frequently used the term “hybrid” in its analysis of the debt problem. The reader may be wondering why banks are described as “hybrid” public corporations. The reason for using the word “hybrid” is easier to digest within a historical context.
Banks as hybrid public companies have two licenses to operate in creating equity. Their first license is the license to operate as a generic corporation. Their second license is a special license granted by the government to integrate the banks into an economic system where the government insures the deposits of bank customers. Key elements of this system have been in place since the 1930s at the urging of Lord Keynes.
The integration of banking into the fabric of our economic society, ostensibly as a social good with its unlimited ability to create credit-debt, has masked the cause of exponential debt creation that started slow and is now out of balanced control.