The total private and public debt in the US in incalculably large and utterly unrepayable. Americans and, to a somewhat lesser extent, Canadians have been spending like drunken sailors for decades. Wanting to “have it all” and live life to the full, they have been living above their means. They hope that the so-called “new economy” will maintain a symbiotic relationship between Third World countries and themselves; with them producing and us gladly consuming. We have “outsourced” much of our food production and manufacturing while believing we would stay prosperous by exporting our intellectual capital. We were to be the brain operating the new economy and the developing nations were to be the brawn doing the manual labour.
Accumulated private debt has put maybe a third of Americans within two pay checks of bankrupcy. As for the public debt it can only be “repaid” by the government repudiating (walking away from) it or by printing so much money as to seriously devalue the dollar; then paying old dollar debts with the new devalued currency. The unavoidable consequence of which would be to create horrendous inflation. The approach of many economic advisors to governments seems to have been that the principle on the debt never had to be repaid, one only needed to keep up with the interest.
And if another “Great Depression” should hit? Well Canadians, being the way they are, will probably expect the government to get them out of it. The irony being it will be the government that will largely put us into it. Governments have long misapplied Keynsian economic theory that invoked government deficit spending to stimulate a depressed economy as normative government policy. The myth is also commonly believed that it was FDR’s “New Deal” that slowly pulled America out of the Depression. As Milton Freedman so well argued, it did nothing of the sort. In fact it probably extended and intensified the unemployment and economic hardship. FDR’s massive public works projects were funded by taking money from some people (taxpayers) and giving to others, usually in areas where the Democratic Party had marginal majorities (the impoverished South being strongly Democrat received the least assistance). The punitive nature of FDR’s policies toward the business sector and the uncertainty of future government policy either displaced or destroyed private-sector investment and therefore jobs. Economists that recognize this failure often claim World War II did the trick. But do you want a major war to pull us out of another depression? Actually the War may not have turned the economy around either. Unemployed men were simply sent off to war and industry was simply geared toward the production of armaments and other military equipment, not what average people needed. In fact many basic necessities had to be rationed throughout the war and for some time after. Likewise taxes were heavily given over to the wartime effort, thus supplying little that ordinary consumers needed. It was likely the return to normal conditions after the war and the removal of the uncertainty that haunted the business sector during the FDR years that helped turn the economy around.