It’s Wednesday and I spent some time this morning reading the latest IMF – Global Financial Stability Report – in which the IMF pretends to know what is going on in the world economy based on a set of erroneous assumptions about how that economy functions. But the data it provides is interesting in itself. Of interest is that fact that Australian households now have the highest debt-servicing ratios in the world as a consequence of record levels of debt and rapidly rising interest rates. What is generally overlooked in these discussions, however, are the circumstances in which the debt rose so much in the first place. In this post, I explain, among other things, how the obsessive pursuit of fiscal surpluses combined with labour market (in favour of the employers) and financial market deregulation (in favour of the bankers) in the 1980s and beyond, created the conditions whereby households could really only maintain growth in consumption expenditure by significantly increasing their indebtedness and running the saving ratio into negative territory. The legacy of that misguided shift to fiscal austerity lives on. Later in the post I make a brief comment about the Middle East and then we listen to some music.