Wednesday, August 13, 2014

House of Debt

In their book House of DebtAtif Mian and Amir Sufi  provide evidence on the causes of the Great recession and what explains the slow recovery and structural weaknesses affecting the most advanced economies. The main argument is that "debt fueled boom artificially boosted household spending from 2000 until 2006 and the collapse of house prices forced a sharp pull back because indebted households bore the brunt of the shock"

Some may argue that the authors have overstated the importance of  housing and household debt in explaining the crisis but there is new evidence which seems to support that argument, which obviously does not explain the whole thing. As some other authors, like Piketty, inequality does play a role in triggering the debt spiral. 

See new evidence here on Mian-Sufi's thesis. 

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