Deleveraging and Growth
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Click to enlarge: Source: Bloomberg BRIEFs Economic Newspaper February 28, 2012 Why has the recovery been so weak? The short answer is Household Deleveraging. Its why post credit crisis recoveries are so much slower across the boards.
There’s a mini-debate going on over the relationship between the housing crash and weak demand. As Cardiff Garcia of FT Alphaville recently summarized it : “This reminded us of the debate last year about whether the sluggishness in consumer spending was the result of households wanting to deleverage or was caused by the big negative wealth effect caused by the huge crash in home prices.” See this from James Surowiecki on the wealth effect and the Q&A I did with Amir Sufi on deleveraging. Which is the main driver, deleveraging balance sheets or a wealth effect? I’m more on team balance sheet . It must seem like an esoteric debate, but it has some consequences.
Asia Research Centre and STICERD public lecture Date: Tuesday 10 January 2012 Time: 6.30-8pm Venue: Old Theatre, Old Building Speaker: Masaaki Shirakawa Chair: Professor Lord Stern Until a few years ago, the long stagnation of the Japanese economy after the bursting of a credit-fuelled asset bubble in the late 1980s was regarded as an episode that would never be replicated elsewhere in the world. Quite a few commentators argued that the recovery became unnecessarily drawn-out and painful because policy responses were ill-timed and inadequate. Many experts believed that prompt and massive policy responses would save any other economy from the same fate as Japan. Three years after the global economy had nearly suffered a meltdown in late 2008, following the collapse of Lehman Brothers, growth, especially in the developed economies, remains anemic, in spite of the huge fiscal stimulus and decisive monetary easing quickly introduced by governments and central banks.
Book Description Publication Date: 9 Feb 2012 | ISBN-10: 111815018X | ISBN-13: 978-1118150184 | Edition: Revised edition Top economist Gary Shilling shows you how to prosper in the slow–growing and deflationary times that lie ahead While many investors fear a rapid rise in inflation, author Gary Shilling, an award–winning economic forecaster, argues that the global economy is going through a long period of de–leveraging and weak growth, which makes deflation far more likely and a far greater threat to investors than inflation.
DEBT & DELEVERAGING