Great Graphic: Uses of Debt in the UK

This Great Graphic was tweeted by Sony Kapoor.    Although the data is drawn from 2009, which makes it appear a bit dated, the important take away is a very small proportion of the UK's debt really can be regarded as productive investment, the kind that boosts the economy's capacity to grow. 

It is common for analysts to discuss how every unit of debt is generating less output in China.   That observation appears true for many other countries, including the UK. 

In a larger sense it says something about investment as well.  Especially in advanced industrial high income countries, the challenge is capital deepening not broadening.   Broadening is replacing by typewriter with a computer.  Deepening is replacing that computer with a better one.  The former requires new net investment.  The latter does not.  

Replacement capital (deepening) carries with it technological advances and often at a cheaper costs, especially as companies get depreciation allowances.  Net new investment, that is net of depreciation, appears to be trending lower.  This is consistent with, but different, than some of Lawrence Summer's recent arguments about the industrialized countries needing less capital. 
Great Graphic: Uses of Debt in the UK Great Graphic: Uses of Debt in the UK Reviewed by Marc Chandler on April 04, 2014 Rating: 5
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