In my opinion, debt by escalating the purchasing power of an economy, which otherwise is not backed by its true purchasing power, filled the economic bubble which bursts at its optimum ...The recent shift of the conventional banking system to profit and loss sharing model of Islamic banking is basically to avoid the shortcomings of the debt-based financial system...
It is a poor way of stimulating growth. Increase in private debt means reduction in private savings. In the long run, growth is not sustained. It is a short-sighted policy of some states to stimulate consumption by using housewhole decificit spending to raise C in the GDP equation. A more effective stimulation should come as a package: government spending on the infrastructure, increase investment throuhgh tax incentive and interest rate adjustment, and increase export earnings.
Dear Muhammad Farhan Basheer, please do check some of my publications regarding the financila crisis case in Greece. I am sure you will get some answers.
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