Last week (in Debt, deleveraging and crisis in the US), I discussed what happened to US debt and borrowing, prior to and since the crisis. In this post, I look at the associated pattern of income and expenditure. It looks at the macroeconomics of deleveraging or what Richard Koo of Nomura Research calls “balance sheet recessions”.
I look at this through the lens of “sectoral financial balances”, an analytical framework learned from the work of the late Wynne Godley.Read it at The Financial Times | Martin Wolf's Exchange
The balance sheet recession in the US
by Martin Wolf
(h/t Scott Fullwiler via Twitter)
Ramanan responds at The Case of Concerted Action with a couple of Godley quotes.
Martin Wolf On Wynne Godley’s Sectoral Financial Balances Approach