Deleveraging: A Long Way To Go

Mike Konczal likes to write very long blog posts, which is convenient for me since I can just pull out one of his subsidiary points and add value by making a big deal out of it. For example, this post on how “housing lock” is not a major determinant of unemployment helpfully illustrates just how far we have to go as a nation in terms of climbing out from under our private sector debts:

This is why it’s actually good that all the verbiage aside, the federal government actually isn’t acting to reduce the deficit in any kind of serious way. With households engaging in massive deleveraging — with more deleveraging to come — it’s crucial for a creditworthy borrower like the United States government to lean against the trend. The problem is that too much of what we’ve been doing lately has been targeted toward putting more money into the hands of high-income folks when it would do more good (both in terms of marginal utility of money and its impact on GDP) to put it in the hands of more liquidity-constrained folks further down the ladder.