A friend told me the economist Charles Kindelberger had two rules for a credit economy. Rule one was everybody should know that if they get over-extended they will not be bailed-out. Rule two was if everybody gets over-extended they must be bailed out. The U.S. economy has over-extended itself, triggering rule two. But that still leaves open how a bailout should be designed since designs are not all equal. (more…)
The U.S. financial system is caught in a destructive liquidation trap that has falling asset prices cause financial distress, in turn compelling further asset sales and price declines. If unaddressed, it risks sending the economy into deep recession – or even depression. (more…)
Over the last year, as the U.S. economy has slipped toward (and likely into) recession, there has been much talk of decoupling. According to this idea the global economy has decoupled from the U.S. economy and can continue growing even if the U.S. goes into recession. (more…)