Contrary to popular belief, government debt is not the primary cause of economic instability; it's the response. Private debt drives booms and busts. When a private debt bubble bursts, government deficit spending is the essential mechanism that injects money into the economy, preventing a full-blown depression.

Neoclassical economics operates like a religion, ignoring empirical data that contradicts its core tenets. The crucial role of bank-created credit in causing financial crises is dismissed because accepting it would unravel their entire equilibrium-based model. This willful ignorance is why they consistently fail to predict crashes.

Don't wait for public credit spreads to blow out as a warning sign. In a system where sovereign debt is the primary vulnerability and corporates are easily bailed out, credit spreads have become a coincident, not leading, indicator. The real leverage risk is hidden in private credit.

Contrary to bubble fears, total credit provided to private companies (including bank loans) has grown in lockstep with the economy. The perceived explosion in private credit is actually a structural shift, with direct lenders capturing market share previously held by traditional banks.

When a bank loan is repaid, the money created for that loan ceases to exist; it isn't just transferred. Widespread debt paydown, often seen as financially responsible, reduces the overall money supply. This directly shrinks GDP and can trigger recessions.

Instead of treating private credit creation as a black box, analyze it by tracking corporate bond issuance in real-time and observing whether the market is rewarding high-debt companies over quality names. A rally in riskier firms signals a positive credit impulse.

Economist Steve Keen's model suggests GDP is a function of money supply and its velocity. Since banks create money through private loans, the rise and fall of private debt directly dictates GDP growth and employment levels, a factor mainstream economics largely ignores.

Many incorrectly believe the 2008 oil price surge drove the subsequent recession. In reality, the oil spike was a marginal factor. The primary driver was the US credit crisis, which caused a withdrawal of capital that crushed emerging market demand for oil, leading to the eventual price collapse.

Contrary to textbook models, banks aren't intermediaries for savers and borrowers. They create new money and debt simultaneously when issuing a loan. This new credit directly adds to aggregate demand, making it a primary driver of economic cycles rather than a neutral facilitator.