How to emerge from the depression that started in 2008

In his Guardian column, William Keegan observes

the central economic issue of our time: how to emerge from the depression that is with us here and now.

The first step to emerging from the depression is to recognize what got us into and is keeping us in the depression:  too much debt.

Too much debt deprives the real economy of the resources that it needs to grow.  Specifically, by protecting bank book capital levels at all costs, policymakers and financial regulators have placed the burden of repaying the excess debt on to the real economy.  As a result, money that is used for repaying the excess debt is money that is diverted from being invested productively in the real economy.

Japan has shown over the last 2+ decades the consequences of diverting money from the real economy to repay excess debt.  So long as money is being diverted from the real economy to support excess debt, the real economy is under constant pressure to shrink regardless of how expansive the monetary and fiscal policies that have been run.

Your humble blogger has been saying for several years that our modern financial system is designed to handle the issue of too much debt without putting the burden on the real economy.  Specifically, the system is designed so that bank book capital levels can absorb the losses from writing down the excess debt to levels that the borrowers can service.

The way to emerge from our current depression is to take advantage of the design of our modern financial system.  This requires the adoption of the Swedish model with ultra transparency.