Thursday, October 21, 2010

Must Reduce Debt


Irving Fisher, quoted by The London Banker, 31 July 2008:
[I]n the great booms and depressions, each of the above-named factors has played a subordinate role as compared with two dominant factors, namely over-indebtedness to start with and deflation following soon after...

Robert P. Brenner, JapanFocus, 7 February 2009:
Households had long counted on rising house prices to enable them to borrow more and to do their saving for them. But now, because of the build-up of debt, they will have to reduce borrowing and increase saving at the very time that the economy most needs them to consume.

SE, The Secret Economist, 8 May 2009:
The global economy cannot return to health until households have worked off at least part of their excess debt. So far they have made little progress.

Tundra Kat, Frozen Arctic Tundra, 25 September 2009:
Combined private and corporate debt reached 230pc of [Spain's] GDP, funded by French and German savings.

Jake, EconomPic, 9 November 2009:
But in the long run we need debt levels as a percent of GDP to rebalance. There are only two ways to do this... decrease the numerator (i.e. delever) or increase the denominator (through growth or inflation).

Janet Daley,, 19 December 2009:
The banking crisis certainly had its roots in the international nature of finance, but the way it affected countries and peoples varied considerably according to the differences in their internal arrangements. Britain suffered particularly badly because of its addiction to public and private debt...

Martin Wolf,, 23 December 2009:
Thirty years of surging growth in private sector leverage, in the balance sheets of the financial sector and in notional profitability of the financial sector in the US and other high-income countries has ended in calamity.

Sackerson, Broad Oak Blog, 24 January 2010:
A recent study of national economies in the last 800 years by Reinhart and Rogoff strongly suggests (as common sense would also suggest) that when debts are very heavy, the economy tips over into recession as we try to repay loans and rebuild savings.

Paul Krugman, The Conscience of a Liberal, 3 May 2010:
American households have to bring their debt levels down.

Stuart Staniford, Early Warning, 3 July 2010:
My operating assumption is that the main current problem with the US economy is Too Much Debt in the private sector, and that all will not be well until both the household and financial sectors have deleveraged back down at least to something like the levels of the 1990s (at a rough guess).

Paul Krugman, The Conscience of a Liberal, 25 September 2010:
I think it’s fair to say that a majority of economists believe that excessive private debt played a key role in getting us into this economic mess, and is playing a key role in preventing us from getting out.

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