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

Listed author(s):
  • 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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File URL: http://www.levyinstitute.org/pubs/ppb73.pdf
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Paper provided by Levy Economics Institute in its series Economics Public Policy Brief Archive with number ppb_73.

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Handle: RePEc:lev:levppb:ppb_73
Contact details of provider: Web page: http://www.levyinstitute.org

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