Asia Sentinel, 26 Nov 2008, Michael Taylor
What are the roots of the global financial crisis, and why has it produced a sudden and shocking collapse in American confidence and economic activity?
What has really gone wrong is that that entire model has collapsed along with the global financial institutions that hot-housed it. Not only has the ceiling come down on the US household sector, but the wreckage is blocking the exits.
It is that collapse of any exit strategies that is doing the damage. Simply to retain household debt-to-equity ratios at last year’s levels will now take a contraction of around 6.1 percent in nominal private consumption spending next year. To eliminate that debt/equity ratio would need a contraction of around 25 percent - the Depression Option.
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