Both Keynes and Irving Fisher suggested that debt-deflation was at the heart of the Great Depression, and in that case debt relief for households should be at the center of the recovery. In the 1930s, the New Deal did provide a lot of debt relief for farmers, on top of trying to raise the prices of agricultural commodities (in order to help famers). Now more is needed in the housing front. The figure below shows how much the debt of the non-financial sector has fallen since the beginning of the crisis.
In terms of non-farm debt, the Home Owners Loan Corporation, a part of the New Deal, helped those facing foreclosure refinance and encouraged the process of de-leveraging consumers. Recovery from a financial crisis like this one does not happen until debtors' balance sheets are cleared. Strange then that we would focus on helping out lenders.
ReplyDeleteMostly reason to create debt is home loan.That's given how to face and do solve this types of problem.Keynes and Irving Fisher given his own view that debt-deflation was at the heart of the Great Depression.
ReplyDeletedebt relief
I see your point, but the graph is misleading. How does it look with a log scale?
ReplyDeleteWell, misleading depending of the intentions. In my case I only want to show that there is a process of debt deleveraging going on. I was just lazy and did not graph it as a ratio of income. You can also do a log scaled graph. FRED gives you the graphs ready, but you can download the data too.
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