The Wall Street Journal of Nov. 7 carries an excellent View image“>graph on page 1. It shows GDP growth for 31 advanced countries since 1970. Each boom shows lower growth. The peaks are 6.4% in 1973, 5% in 1976, just under 5% in 1984 and 1988, 4% in 2000, and 3.1% in 2004. As debt is being added to finance growth, the added debt is becoming less and less associated with added growth.

Central bank credit (and borrowing of all kinds) is becoming less and less able to stimulate the advanced economies. In the latest U.S. boom, the re-financing of mortgages at lower rates accounted for much of the recovery. It would have been even weaker without that credit stimulus. The added debt is being used to finance worse and worse low return investments that add less and less to growth; and to finance consumption that adds nothing to growth. In Austrian terms, as the credit-financed mal-investment grows, the real economic growth declines.