Richard Koo on balance sheet recessions
By Mike Konczal
Here's a chart that is noteworthy:
It's a big chart to read, but what is worth noting is that despite the two efforts to introduce fiscal reforms to reduce the deficit (Hashimoto and Koizumi), the deficit immediately exploded. Great. As Koo argues, the economy will not enter self-sustaining growth until the private sector balance sheets are repaired. Even with zero interest rates, there are no borrowers of newly generated savings and debt repayments. With no borrowers, the economy will continue to lose aggregate demand. If you want to be worried further, here's his paper, “U.S. Economy in Balance Sheet Recession: What the U.S. Can Learn from Japan's Experience in 1990-2005.”
Posted by: nklein1553 | May 25, 2010 11:07 PM | Report abuse
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