Krugman, 22 Jan 2012, Notes on Deleveraging, links to the McKinsey Global Institute report on debt and deleveraging. The McKinsey page says
history shows that, under the right conditions, private-sector deleveraging leads to renewed economic growth and then public-sector debt reduction.
What I've been saying. In order to get the economy to grow, we must reduce private debt. Not public debt. Private debt.
The "history" to which McKinsey refers would look something like this:
|Graph #1: Debt per Dollar, 1916-1990|
Up until we had a Great Depression...
Down until we got a Golden Age... and
Up again, until we could bear it no longer...
|Graph #2: Debt per Dollar, 1916-2010|
Oh, and yes, the public debt fell continuously all during the Golden age. And when it was low and could go no lower, there was an end of the Golden Age, and the start of troubles that continue to this day.
|Graph #3: The Federal debt compared to the rest of Total Debt|
And that's the way it is...