in support of PIMCO.
misunderstanding by the cleverest comrades of the simplest features of the current moment scares me because:
and) these comrades considered the concept of a balance sheet recession, analyzed it and came to the conclusion, what can you forget about it as unnecessary. and I stopped at the stage of studying the concept itself, ignoring reality.
b) comrades actually, not interested. "мол, we had a couple of ordinary recessions after WW2, it's the same & quot;. why is the second scary?) but by a funny analogy: not yet clear, which is worse – be right or wrong yourself)
I will somehow collect my thoughts and sign, What did Richard Koo really write about the balance sheet recession?, while you can remember And .
While a little about that, what we already know (on the supply side):
1) financial panic was stopped at all costs, debt growth, balance FED And so on, these are minor secondary effects of treatment. (analogy with medicine – before the patient is treated, this patient must be alive, and if he needs to cut or ruin something to support life, then it should be done. the question of the price is not worth it. if the patient dies, then it will be too late to rejoice in the kidneys not killed as a result of treatment).
2) the unprecedentedness of the measures allowed `` unexpectedly" give the economy a powerful boost to recovery: incentives,inventory cycle and low base for selected indicators (sorry for the banality) have done and continue to do their job. Really, according to my estimates, inventory cycle, to a greater extent continues to smoke on the sidelines, not yet fully operational.
3) the reactions of indicators and markets are normal, hard anomalies have not yet been observed. we are in the process of normalizing, which still has a certain momentum, who really tried to dry out at the beginning of the year, but as we know it has not dried up.
(and here the demand side already enters about which we still know little)
4) within the usual recession after WW2, this is where it all ends. as part of an ordinary recession, the segments most sensitive to rates suffer mainly as a result of the growth of these same rates (durable goods + mortgage), the rest of the segments remain at the level. all the trick is, that this time we have a different recession. or still not different?)
5) the next in line to be involved in economic growth is the consumer. in our case demand – this is the patient's heart restarted as a result of the use of a defibrillator. run launched, now the question is, will it beat on its own?
6) what can prevent consumption from growing? (yes we all heard about the theory of the crisis and the shutdown of the economy, but right, there are no vacancies in the circus, although if the adepts share their salaries, Who knows, eternal demand))). on-the-go, option one: balance sheet recession. fur-m short: the value of your assets (real estate) decreased – distorted the balance – debt burden needs to be reduced (concerns both households, and the private sector). decrease in debt load = decrease in demand. households save more to some extent (which, by the way, we see in the part `` to some extent more .. ''), and the private sector does not borrow what households save (as well as the households themselves do not take very much on credit). as a result, we get a direct reduction in GDP, which must be replenished by state expenses.
7) the problem of the balance sheet recession is not in its presence, but in ignoring her. we ignore the problem of balances, we get Japan with its attempts to reduce the deficit, which for some reason led to a deterioration (oh how strange, but it seemed that incentives did not work. but we turned a little and got it right away).
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Eventually, if we have a balance sheet recession – then there are still a lot of surprises and problems awaiting us, of which the problem of debt growth becomes a problem, only in case of an attempt to combat this problem. therefore, long-phobia in government can become the most formidable weapon of the apocalypse))
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How to determine, do we have a balance sheet recession? there is such an option – answering a question: Was there a real estate bubble in the United States?? just let's decide what to call a bubble..
here 90% falling land prices in Japan, this is a bubble. and 30% decline in house prices, it's still just an overheated market correction. it is not so difficult to patch the existing hole in the balances. but if it starts to grow… (we read the prices for residential real estate will reach at least – 50% from the peak).
about the bubble, whether he was or was not..
I've heard, that Amsterdam, we are the maximum 16-18 (?) centuries in real terms have not yet overcome. and Greenspan was right, talking about regional bubbles…
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