This paper will explore the ideas that money is created by debt, and that new money is necessary for economic growth, and that therefore, absent calamity, debt will always grow faster than GDP. The implication of this is that the trend toward over-indebtedness is intrinsic to current economic systems.

Strange things are happening to interest rates. For years, it had been suggested that big deficits and higher levels of government debt would bring inflation and higher rates, but the opposite happened: inflation is low and interest rates have been plunging for almost forty years—in spite of skyrocketing debt levels and numerous periods where money supply growth has been high. What is more, since the Great Financial Crisis, the Fed and other central banks of the advanced economies have undertaken unprecedented monetary policy with various forms of quantitative easing that many economists warned would result in an acceleration of inflation and skyrocketing market interest rates.  Yet in the United States, Europe, and Japan inflation remains below central bank targets and interest rates are historically low, even in negative in several cases. 

Have we had it completely backward?

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Richard Vague

Richard Vague

Managing Partner, Gabriel Investments

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Richard Vague is currently one of the managing partners of Gabriel Investments and the Chairman of The Governor’s Woods Foundation, a non-profit philanthropic organization. He is also the author of The Next Economic Disaster, a book with a new approach for predicting and preventing financial crises, and A Brief History of Doom, which documents the history of private debt crises. Previously, he was co-founder, Chairman, and CEO of Energy Plus, an electricity and natural gas supply company operating in states throughout the U.S. that was sold to NRG Energy in 2011. Vague was also co-founder and CEO of two credit card companies – First USA, which grew to be the largest Visa issuer in the industry and which was sold to Bank One in 1997, and Juniper Financial, the fastest-growing credit card issuer of the past decade, which was sold to Barclays PLC in 2004.



Richard Vague on Why Large Rapid Build Ups of Private Debt Cause Financial Crises.

An excerpt from The Next Economic Disaster: Why It's Coming and How to Avoid It.


America's Private Debt Problem: How Private Debt is Slowing Down Growth and Hurting the Middle Class

A World Economic Roundtable report on private debt and the American middle class.


A Guide to Essential Readings on Private Debt


Private Debt Bonanza, Public Debt Legacies: The Euro-Zone’s Experience With Liberalized Private Finance Under Its Ill-Designed Currency Union

How institutional design and austerity is destroying the European economy