If we are going to make sense of the current state of world economic affairs, we must first answer the difficult question of why debt keeps increasing. More and more debt is being accumulated and right now we are in a place where such debt would take decades to repay. Let's go over some reasons:
1. Because of past mistakes we are paying off old loans with new loans. All over the world there is an increasing amount of revolving credit that is not paid off, similar to how a consumer allows credit card balances to remain elevated, only to find they cannot keep up with the payments, so they go get another credit card. However, in the case of consumers credit is not available like it was in the past. Instead of consumers running up debt, it is banks and governments.
2. In order to "protect" banks from failing, governments are lending money through facilities like the fed discount window at a near zero interest rate in hope this will keep banks solvent, and even that banks will improve their balance sheets. Sadly, even at zero percent banks are continuing to increase their leverage.
3. Banks have been increasing their leverage through ever more complex financial products. Terms like Credit Default Swap and Re-hypothecation sound difficult to understand, and there is a reason for that. Banks do not want people to understand them. But to put it in simple terms, it used to be that banks lent out about 5 times more than they had help in deposits. Now they are lending out more like 30 times more than they have in deposits. Why would they do this?
4. Those running banks are paying out record bonuses for short term profits that are extremely damaging to long term fiscal viablity. By continuing to increase leverage (ex. from 5 to 1, to 30 to 1) they are essentially creating money out of thin air, and then finding ways to pay that money to leading stock holders and board members. How can they get away with this?
5. Governments know that if these mega-banks fail it will dismantle a large part of the financial system. In many ways allowing them to fail is worse than continuing to bail them out. So governments keep pumping money into them hoping they can get the banks fixed. The problem is these banks are massively lobbying the very people whose responsibility it is to regulate them.
So that gives a perspective. I'm not offering solutions, but hopefully as more people understand the dynamic, they will work together to solve these difficult problems.