Is private debt the thing economics can't see?

Open an economics textbook and you'll barely find private debt. That's not an oversight — it's the flaw. Mainstream models treat lending as one person handing savings to another: no new money, no macro consequence. So when private debt in the US, UK, Australia and China climbed past 150% of GDP, the models saw nothing to fear.

Keen's correction is one line: aggregate demand is income plus the change in debt. That second term — credit — is where booms come from and where they end: borrow, and you spend money that didn't exist a moment before; stop, and demand falls off a cliff no income-only model can see. That's 2008 — and why the economists who ignored private debt didn't see it coming, while Keen did.

The models here don't argue it, they run it: load the BIS private-debt data into Ravel and watch credit track the crises; open the Keen-Minsky model and watch a stable economy generate its own collapse. Then open it, change the assumptions, and see the mechanism for yourself.