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Flow of Funds Figures Show the Largest Drop in Household Borrowing in the Last 40 Years


  • Gennaro Zezza


The Federal Reserve's latest Flow of Funds figures reveal that household borrowing has fallen sharply lower, bringing about a reversal of the upward trend in household debt. According to the Levy Institute's macro model, a fall in borrowing has an immediate effect--accounting in this case for most of the 3 percent drop in private expenditure that occurred in the third quarter of 2008--as well as delayed effects; as a result, the decline in real GDP and accompanying rise in unemployment may be substantial in coming quarters. For further details on the Macro-Modeling Team's latest projections, see the December 2008 Strategic Analysis Prospects for the U.S. and the World: A Crisis That Conventional Remedies Cannot Resolve.

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  • Gennaro Zezza, 2008. "Flow of Funds Figures Show the Largest Drop in Household Borrowing in the Last 40 Years," Economics Strategic Analysis Archive sa_jan_09, Levy Economics Institute.
  • Handle: RePEc:lev:levysa:sa_jan_09

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    References listed on IDEAS

    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. Dean Baker, 2002. "The Run-up in Home Prices: A Bubble," Challenge, Taylor & Francis Journals, vol. 45(6), pages 93-119.
    3. Karl E. Case & Robert J. Shiller, 2003. "Is There a Bubble in the Housing Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 299-362.
    4. Wynne Godley & Dimitri B. Papadimitriou & Claudio H. Dos Santos & Gennaro Zezza, 2005. "The United States and Her Creditors: Can the Symbiosis Last?," Economics Strategic Analysis Archive sa_sep_05, Levy Economics Institute.
    5. Marco Del Negro & Christopher Otrok, 2005. "Monetary policy and the house price boom across U.S. states," FRB Atlanta Working Paper 2005-24, Federal Reserve Bank of Atlanta.
    6. anonymous, 2004. "Asset prices and monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, march.
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