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If I lend you money to buy a meal and you do so the money is spent on paying for the meal. The good news is that you are paying towards sustaining the restaurant, its employees and suppliers, such as farmers, who provide the resources needed.

Once spent, the money I lent you has gone with no prospect of a return. You owe it to me – it was a loan – but to repay it you must earn or borrow it from someone else. My loan is “non-productive”.

If I lend money to an oil company they use that money to find and produce more oil which they sell. That enables them to pay back my loan and keep some profit themselves with which to pay their staff and suppliers but also to explore for more oil. My loan to them is productive.

Governments have been borrowing for many years to pay for education, social welfare like unemployment benefit and healthcare, defense and the costs of government and civil service. It is all expensive but unproductive. Indeed, helping people to live longer is economically counter-productive. However, we do not advocate shooting the retired and the sick as a swift remedy to the problem, effective as it would be.

To try to convince us that their spending is wise successive governments have referred to it as ‘investment’. Gordon Brown, a former UK Chancellor, was good at making profligate growth of the civil service sound like an investment. It was not, it was a cost. Understanding the difference is quite important if you are to be a Finance Minister. Building debt produces short-term benefit which soon disappears leaving longer-term problems.

Mortgaging the future, which we all do one way or another at certain times in our lives, is only viable when we know we can repay the debt. Once it reaches a level at which we cannot repay it we are in trouble. European debt has long since reached that level and recently pumping in another trillion euros has only compounded the problem.

While all this has been going on companies have mostly been behaving extremely prudently, building their cash reserves against the day they need to invest in modern machinery and software and reducing their dependence on the banks that let them down so badly when the last economic crisis struck.

So governments are losing it and companies are conserving it – almost the opposite of what capitalism was meant to be about. A government spent dollar produces no income. A company spent dollar produces new revenue. Interesting to think about where that will leave power to decide the future, even in the most democratic societies.