Macroeconomics and the Financial Cycle

This is much like what we did in the US about the S&L Crisis but haven't done relatively much about the Great Recession and its aftermath (Are we still paying for that as a mistake and will be for a long time to come?):

For prudential policy, it means repairing banks’ balance sheets aggressively through the full recognition of losses, asset disposals, recapitalisations subject to strict conditionality, and the reduction of operational excess capacity necessary for sustainable profitability. This is what the Nordic countries did and what Japan failed to do following the bust in their respective financial cycles in the early 1990s; it is what partly explains their subsequent divergent economic performance.

For fiscal policy, it means creating the fiscal space needed to use the sovereign’s balance sheet to support private-sector balance-sheet repair while avoiding a sovereign crisis down the road. This can be done through bank recapitalisations, including via temporary public-sector ownership and selective debt relief for the non-financial sector (eg. households). In fact, contrary to received wisdom, pump-priming – where it can be afforded – may well be less effective in a balance-sheet recession, as agents tend to save the extra money to repay debt, resulting in a low multiplier. By contrast, by relieving debt burdens and asset-quality problems, the alternative use of fiscal space could set the basis for a self-sustaining recovery.

via Macroeconomics and the financial cycle: Hamlet without the Prince? | vox.


If you are an investor in 1-4 unit properties in Arizona, California, Nevada, Oregon, Utah, or Washington, please do the financially responsible thing and make sure you have proper Landlord Insurance with PropertyPak™. We love focusing on real estate and the economy in general, but we are also here to serve your insurance needs.

Hill & Usher (PropertyPak™ is a division) has many insurance offerings. See our menu above for more info and links.

Did this post help you? Let us know by leaving your comment below.

Note: This blog does not provide legal, financial, or accounting advice. Seek professional counsel.

Furthermore, we, as insurance producers, are prohibited by law from disparaging the insurance industry, carriers, other producers, etc. With that in mind, we provide links without staking out positions that violate the law. We provide them solely from a public-policy standpoint wherein we encourage our industry to be sure our profits, etc., are fair and balanced.

We do not necessarily fact checked the contents of every linked article or page, etc.

If we were to conclude any part or parts of our industry are in violation of fundamental fairness and the legal standards of a state or states, we'd address the issue through proper, legal channels. We trust you understand.

The laws that tie our tongues, so to speak, are designed to keep the public from losing confidence in the industry and the regulatory system overseeing it. Insurance commissioners around the country work very hard to analyze rates and to not allow the industry to be damaged by bad rate-settings and changes in coverages. The proper way for people in the industry to deal with such matters is by adhering to the laws, rules, and regulations of the applicable states and within industry associations where such matters may be discussed in private without giving the industry unnecessary black eyes. Ethics is very high on the list in the insurance industry, and we don't want to lose the people's trust. That said, the industry is not perfect; but what industry is?

For our part, we believe in strong regulations and strong regulators.

We welcome your comments and ask you to keep in mind that we cannot and will not reply in any way or ways where any insurance commissioner could rightly say we've violated the law of the given state.

We are allowed to share rating-bureau data/reports and industry-consultant opinions but make clear here that those opinions are theirs and do not necessarily reflect our position.

Subscribe