Balance Sheet Recession

What happens when all the businesses in an economy start to reduce debt loads using cashflow at the same time?

According to Richard Koo, this action -> response -> reaction is what the “Great Depression” was all about and that the same factors are at play right now…only this time on a global scale.

Below is an except of his address to the Institute for New Economic Thinking at King’s College, Cambridge. Koo is the world-renowned chief economist of Nomura Research Institute and the author of “The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession”.

For more information see the Institute for New Economic Thinking website.

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