Now in an online review of the 2012 edition Occupy Money, It’s the Interest, Stupid! Why Bankers Rule the World, Ellen brown reports that an economist has calculated the amount in the USA as 35-40% of GDP.
This is bad news for the UK as our private debt is much higher than the USA - which is a factor in why their economy is in recovery and ours is not. Their private debt peaked at 303% of GDP, whereas UK debt peaked at 475% of GDP (according to the 2011 Budget Report). Current rates are about 250% in the USA (according to Steve Keen and this graph) and 450% in the UK.
|USA Private Debt 1920-present|
|UK Private Debt 1987-2010|
And note Steve Keen's important point that even now private debt is much higher as a percentage of GDP than it was at the peak that caused the Great Depression.
Now if the USA is losing 35-40% of it's GDP then proportionally the UK is losing much more. I'm hesitant to put a figure on it based on this information it has to be more than 50%. And this is a chilling figure. Imagine if Camoron was right and we were to treat the UK like we were running a credit card. More than half our income is going on interest payments, let alone paying off the principle.
And just a note to acknowledge that Robert Peston wrote about this on the BBC Website in November last year. His figures are from a different source, I prefer to use the government's own figures - the differences reflect the difficulty in calculating these figures. He has UK private debt at 481% of GDP in 2008 and rising to 492% in 2011 (or £7.4 trillion). The rise is being driven by financial institutions. So actually Peston's analysis is even more pessimistic than mine. I've tweeted him to ask what he thinks the interest payments might be. Chance of an answer is about zero, but one has to try.