Read on Twitter
The US financial system is on ventilator support administered by the federal reserve - second time in the last 12 years.
Our financial system is immunocompromised and the disease has progressively worsened.
Let us try to diagnose the disease ...
Our financial system is immunocompromised and the disease has progressively worsened.
Let us try to diagnose the disease ...
In 1980 a 1% rise in spread, or cost of borrowing due to an economic disturbance, put an *additional* burden of 1.4% of GDP on the indebted.
The federal reserve could counter that adverse shock by lowering interest rates an equivalent amount.
The federal reserve could counter that adverse shock by lowering interest rates an equivalent amount.
Today, the same shock would put an *additional* burden of 2.5% of GDP on the indebted, AND the federal reserve cannot lower rates any further.
Hence the need for a ventilator.
But you cannot live a normal life on a ventilator. We need new solutions, and we *can* do it.
Hence the need for a ventilator.
But you cannot live a normal life on a ventilator. We need new solutions, and we *can* do it.
@profsufi @ludwigstraub and I have written about the nature of this "indebted demand" problem, and how it leads to "debt traps" that require ventilators here. https://scholar.harvard.edu/straub/publications/indebted-demand
You can also watch @ludwigstraub present the paper on Thursday, April 16th @ noon eastern, or 4pm GMT in a webinar here. https://sites.google.com/view/virtualmacro/
