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22/03/2014, 23:20
... increasehasbeennotable,
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Thisisnottodenysuccessfuleffortsbyanumber of countries,includingChina,toexpandmarketsinother
EME’s. Of coursethisstillleaves the broaderquestion of the robustness of the totality of thosemarketsin the
event of aseriousdownturnin the AME’s.
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ThisproblemisanalogoustothatfacedbyJapanesecorporationsin the 1990’s,aftermanyyears of debt
financedinvestmentwhichprovedunprofitable.Koo(2003)stronglycontendsthat the weakness of investment
spendinginJapanin the 1990’s was duetothis“balancesheeteffect”,and was notdueto
ashortage of loans
causedbyaweakenedbankingsystem.
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SeeBIS(2012)p29forafullerdocumentation.AlsoseeMcKinsey(2010)whoidentify the householdsectorin
five of the fourteencountriestheyconsiderashavingahighprobability of futuredeleveraging.TheyidentifySpain,
the US, the UK,CanadaandKorea.While the householdsectorsinBrazil,Russia,
ChinaandIndiawerenotjudged
tobeoverleveraged,notethat the dataconsideredextendedonlyto2009.Thus the reportmissed the recent
sharpincreasesinhouseholddebtlevelsinthosecountries.
... be
58
AsEME’sbegintoindustrialize,theyinitiallyhave the benefit of rapidurbanization(asagriculturalproductivity
rises)and the internationaltransfer of technology.Overtimeboth of these“catchup“factorssupportinggrowth
becomelessimportant.
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Itisimportanttonotethat the debate was with the Keynes of the “Treatise”andnotyet the Keynes of the
“GeneralTheory”.In the TreatiseonMoney,Keynescalledformonetaryauthoritiestotake“extraordinary”,
“unorthodox”monetarypoliciestodealwith the slump.Kregel(2011)p1,contends
that The unorthodoxpolicies
thatKeynesrecommendsareanearlyperfectdescription” of the ultraeasymonetarypoliciesfollowedinJapan,
andmorerecentlyinothercountries.Recall,asnotedabove,thatKeynes’enthusiasmforsuchmonetarymeasures
hadfadedby the time of the GeneralTheory.
... recapitalize the central bank
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, this would be both
embarrassing and another potential source of influence of the government over the central
bank s activities. Second, the ...