What Happens to an Economy When Credit Stops Flowing?

The David McWilliams Podcast

David McWilliams

News & Politics

4.5 • 692 Ratings

🗓️ 17 February 2026

⏱️ 40 minutes

🔗️ Recording | iTunes | RSS

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Summary

Credit is the lifeblood of a modern economy. When it expands, ideas turn into companies, small builders become employers, and innovation compounds. When it contracts, the damage is slower, quieter, and far harder to see. In this episode, we trace what happens when banks stop lending and money stops doing its real work. Using Ireland as a case study, we show how domestic credit has collapsed since the crash, from banks lending 160% of deposits at the peak of the Celtic Tiger to barely 40% today, and why that matters far more than headline GDP figures. Drawing on history, from the silver mines of Potosí to Spain’s long decline, we explain why money is never neutral, why credit fuels growth in ways governments cannot replicate, and how multinational windfalls can mask a dangerously hollowed-out private economy. The result may look like prosperity, but it behaves more like stagnation.

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Transcript

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0:00.0	Coming up on today's podcast, credit, where credit is due, are no credit or what is happening to credit in Ireland.
0:06.3	There has been a collapse in domestic credit.
0:09.3	The banks are simply not lending in the country.
0:11.6	This has led to a jaundiced economy, and we're going to talk you through the ramifications, the consequences and the causes, all in a couple of minutes.
0:21.5	To understand the economy, you have to understand human nature.
0:27.7	This podcast is powered by ACAST.
0:33.8	How you doing there? It is time for the podcast. The podcast today is going to be a...
0:40.0	If you can imagine, if you can just close your eyes and imagine a giant sucking sound.
0:47.8	Okay? Imagine that. That is credit, John. What would you think, my friend? That is credit.
0:53.9	Credit. Leaving the Irish economy.
0:56.6	Okay?
0:57.0	We're going to talk about the disappearance of credit in Ireland.
1:02.3	Right.
1:03.0	And that is a massive, massive issue.
1:05.6	At the peak of the Celtic tiger, I'll just give you a figure.
1:09.0	And the reason this is important is because credit lubricates the economy. The peak of the Celtic Tiger, I'll just give you a figure. And the reason this is important is because credit lubricates the economy.
1:13.0	The pick of the Celtic Tiger, the ratio of deposits in the banks to loans given out was
1:19.6	160%.
1:20.9	Now that means that for every 100 euros the banks had in deposits, they were lending out 160,
1:27.0	right?
1:27.4	Right. And this is how they blew their balance in and I'll explain how out 160, right? Right.
1:27.9	And this is how they blew their balance in and explained how that happens, right?
	...

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