Home > Real-World Economics Review, RWER > RWER issue 54: Steve Keen

RWER issue 54: Steve Keen

Real-World Economics Review, issue 54
You may read the whole paper here:
http://www.paecon.net/PAEReview/issue54/Keen54.pdf

Deleveraging is America’s future

Steve Keen   [University of Western Sydney, Australia]

            The latest Flow of Funds release by the US Federal Reserve shows that the private sector is continuing to delever. However there are nuances in this process that to some extent explain why a recovery appeared feasible for a while.

            The aggregate data is unambiguous: the US economy is delevering in a way that it hasn’t done since the Great Depression, from debt levels that are the highest in its history. The aggregate private debt to GDP ratio is now 267%, versus the peak level of 298% achieved back in February 2009–an absolute fall of 31 points and a percentage fall of 10.3% from the peak. 

You may read the whole paper here:
http://www.paecon.net/PAEReview/issue54/Keen54.pdf

  1. shivz
    October 5, 2010 at 4:04 pm

    Steve Keen writes: “…aggregate demand as I define it: the sum of GDP plus the change in debt (where this demand is spread across both goods & services and the asset markets).”

    Will someone kindly explain:

    1. What assets are meant in the “demand is spread across… asset markets”: fixed, and/or tangible and/or financial assets?

    2. Assuming that measurement is accurate, is not aggregate (domestic) demand faithfully recorded by the C+I+G numbers (i.e., before accounting for trade)?

    Or put differently, changes in debt notwithstanding, can aggregate demand be higher (or lower) than the C+I+G numbers?

  2. Dick Burkhart
    October 18, 2010 at 9:36 pm

    Please explain more clearly why it is that acceleration of debt that increases demand, not just an increase in debt? Your notion of aggregate demand seems to imply the latter, not the former.

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