Koo’s main viewpoint is that the world today is much like Japan has been since the late 80s: In the throws of a balance sheet recession, a period where the private sector’s main objective is debt minimization. This calls for aggressive fiscal policy, as monetary policy doesn’t work at these levels. There’s no point in lowering rates when people can’t or don’t want to borrow more.
His presentation is pretty big, but it’s a must-see. However we’ve also clipped out our favourite slides from the presentation to show you a condensed version.
When the government tries premature fiscal consolidation, things get much worse, and debt goes higher.
Meanwhile, what appears to be a recovery in the US is just a blip and doesn't change our downward trajectory.
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