Endeudamiento familiar y crecimiento económico: un patrón de crecimiento insostenible

The Spanish economy experienced a period of substantial prosperity from 1997 to mid 2007, driven by household spending on residential investment and durable consumer goods, funded out of bank debt. However, this pattern of growth was unsustainable: any given rate of growth of output required growing household indebtedness, because of rising house prices which, in turn, led to heavier debt burden service thus subtracting funds which would otherwise have gone to sustaining aggregate demand at a higher level. When household indebtedness stops growing, because its currently rocketing level, plus the rise of the interest rates, the high house prices, the saturation of the dwelling market, and the tightening of credit standards required by banks, GDP and employment shrink because of a lack of effective demand: forced saving to settle debt service is not offset by new household borrowing.