Debt Growth and the Financial System

Since 1982, the indebtedness of domestic nonfinancial sectors has increased from around 140 percent of nominal gross national product (GNP) to 170 percent. This extraordinary growth contrasts sharply with the pattern of debt growth over most of the post- World War II period. Between 1951 and 1982, for example, debt growth was remarkably stable, continuing in direct proportion to nominal GNP. Although debt increased sharply relative to GNP from 1929 to 1933, this increase largely reflected a 46 percent decline in GNP over the same period. Meanwhile, some measures of debt were declining in absolute terms. In fact, domestic nonfinancial debt (the measure of total debt used in this article) actually declined 14 percent from 1929 to 1933.