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Asset and Debt Deflation in the United States: How Far Can Equity Prices Fall?


  • Philip Arestis
  • Elias Karakitsos


In an asset and debt deflation, the process of reducing debt by saving and curtailing spending takes a long time, say the authors. Current imbalances and poor prospects for spending in the private sector affect the balance sheets of the commercial banks. The downward spiral between the banks and the private sector induces a credit crunch that adversely affects the U.S. economy, which is vulnerable to exogenous shocks and lacks the foundations for a new, long-lasting business cycle.

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  • Philip Arestis & Elias Karakitsos, "undated". "Asset and Debt Deflation in the United States: How Far Can Equity Prices Fall?," Economics Public Policy Brief Archive ppb_73, Levy Economics Institute.
  • Handle: RePEc:lev:levppb:ppb_73

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    1. Dimitri B. Papadimitriou & Anwar Shaikh & Claudio H. dos Santos & Gennaro Zezza, 2002. "Is Personal Debt Sustainable?," Economics Strategic Analysis Archive 02-11, Levy Economics Institute.
    2. János Kornai, 1986. "Contradictions and Dilemmas: Studies on the Socialist Economy and Society," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262111071, January.
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