The debt-restraining trends of the Bretton Woods settlement were not reversed until, in the late 1960s, the US began to live – and kill – considerably beyond its means, borrowing enormous sums to cover Johnson’s Great Society and the Vietnam War. It was to avert a run on American reserves that Nixon first disconnected the circuit between paper and bullion. When dollar-gold convertibility was abandoned once and for all in 1973, borrowers and lenders began to ply a more insubstantial trade. In the decades since, all monetary debts have been mere ‘paper promises’. Paper money debts, Coggan argues, being no more than titles to future slips of paper, multiply more easily than debts reckoned in fixed sums of specie, and, starting in the early 1970s, overall indebtedness has indeed grown faster than most national economies: ‘In the last forty years, the world has been more successful at creating claims on wealth than it has at creating wealth itself.’ Four decades ago, the US had a total debt burden – adding up the liabilities of government, businesses and individuals – hardly larger than its annual output. By 2010, many countries laboured under debt burdens several times the size of GDP. The American figure was approximately three to one; the British, four and a half to one. In Ireland and Iceland, total debt to output ratios had swollen to eight or ten to one on the eve of the 2008 collapse.
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