Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
...debt repayment subtracts from growth as people defer or forgo consumption to pay down debt.

Obviously this is true, but hardly the reason for the recession now or housing market crash. The debt first creates debt deflation to real economy, and only after that, problems start. All happens before deleveraging. I'm quite sure that USA, Ireland or Spain were not deleveraging when problems started. The Serious People talked about "liquidity" (whatever that in the end means(most likely a recession of the real economy)).

by kjr63 on Sun May 22nd, 2011 at 05:15:30 PM EST
[ Parent ]
A financial crisis leads to banks stop lending which is very bad news as all sorts of investments hinges on bank loans. The longer it lasts, the worse the consequences.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Mon May 23rd, 2011 at 05:00:44 AM EST
[ Parent ]

Display:

Occasional Series