Balance Sheet Recession - Keyensian oulook? (Richard Koo via Economist's View)

This is a fabulous discussion from someone that has a good understanding of the Japanese path to their current stance.  As he comments, we tried everything.  Fiscal Stimulus, Quantitative Easing, Deficits, etc. etc.  None of it worked.  A balance sheet recession.  There are two conditions necessary for this stance to be resolved:

1. In the case where debt is paid off against maximizing profits generated, the economy will not grow, until Private Sector balance sheets have been repaired;
2. Reducing government spending in this environment, unless you can determine with certainty that the money will be put to work by the recipients, fiscal reform will fail.

Apr 11, 2010

Richard Koo: Debts, Deficits, and Global Financial Stability

Posted by Mark Thoma on Sunday, April 11, 2010 at 09:09 AM in Budget Deficit,Economics, Financial System  Save to del.icio.us  Tweet This  Reblog  Permalink Comments (8)