While excessive private-sector debt (especially in mortgages) was blamed for financial meltdown of 2008 that began in the USA, the supposed remedy for the economic turmoil was to boost spending based on more public-sector debt. Now, the imbalance of excessive debt is now far worse due to what has become a massive “bubble” in public-sector debt that has crowded out private borrowing and lending.
As it is, private commercial banks earn large profits in buying government bonds since lending to private borrowers involves much higher costs and greater risks.
Consider that from 1974 to 1980, each $1 increase in GDP was accompanied by increased debt of between $.20 & $.47. After 2009, each $1 increase in GDP was accompanied by $2.50 increase in debt such that the growing expansion in the additional amount of debt needed to support increased each $1 of GDP will stifle economic growth & destabilize financial sector.
In Q1 2012, GDP rose $142B & debt rose $355B, such that $2.50 additional debt only generated $1.00 additional GDP.
Data source: http://globaleconomicanalysis.blogspot.in/