Steve Keen, “Sense from Krugman on Private Debt,” August 17th, 2011.Steve Keen in the first post makes some important points:
Bill Mitchell, “Self-inflicted Catastrophe,” August 18, 2011.
Mark Weisbrot, “U.S. and Europe: slow strangulation is much more likely than financial Catastrophe,” August 18, 2011
“Interview with Randy Wray, Regarding the Next Crisis (Part 2),” August 13, 2011.
“... one reason why deflation hasn’t been as sharp this time as it was in the Great Depression—even though the private debt level is higher—is that non-financial businesses are actually in less debt now than they were then. Non-financial businesses entered the Great Depression with a debt to GDP ratio of 100 per cent—well above the 75 per cent level that applied at the start of our crisis. So they don’t face the same direct pressure to service debts that led to the “distress selling” Fisher focused upon. But households are in far worse shape now than in the 1930s, with a peak debt level that is two and a half times as high as it was in 1930. That’s why the crisis now is manifesting itself in stagnant consumer demand. It doesn’t involve the same plunge into deflation as the Great Depression, but it does imply a more drawn out deleveraging, because it’s much harder for households to reduce debt than it is for businesses. Businesses can get out of debt by going bankrupt, sacking workers, and stopping investment. Households have to live with the shame of bankruptcy and the limitations it imposes on behaviour in future, they can’t sack the kids, and it’s impossible to stop consuming completely. So we may face a far more drawn out process of deleveraging than the Great Depression.”