Monday, July 8, 2013

There is a painful period that can last over a decade

It’s been anemic because the financial crisis was one, first in which it was too much debt, leverage and excessive risk taking in the private sector, households, banks, financial institutions, even corporates. And now is the result of the resolution of financial crisis were the search of public debt and deficits.

Historically, whenever you start with too much private and public debt, there is a painful period that can last over a decade, where growth is going to be anemic. Why? Because you have to spend less, to save more or dissave less to gradually reduce this tox of deficit and debt.

And that implies that economic growth has been very weak in the United States, in Europe, in Japan and other advanced economies. And that’s going to continue. Eventually, that slow economic growth is associated with rising unemployment rate, and also with social and political unrest. That’s the situation we’re facing right now – is unstable disequilibrium, is the new abnormal. We’re ahead of decade of very low economic growth.”