Historically, consumer deleveraging cycles see debt relative to income decrease by 30 to 35 percent.
As near as we can tell, deleveraging has a long way to go, say seven years.
Yet another element of deflation is the massive deleveraging that comes with a major credit crisis.
His latest book, The Age of Deleveraging, predicts a decade of slow growth and deflation.
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It is not clear whether deleveraging will cause more inflation or a deflationary depression.
Third, the best way to ease the pain of deleveraging is with an export-led boom.
This has helped to cushion America from the ill effects of deleveraging at European banks.
With household debt still at 129% of disposable income, deleveraging could go on for some time.
Despite considerable progress, the drag from household deleveraging still has months and billions to go.
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But they misjudged the thin capacity of deleveraging economies to withstand shocks by taking on more debt.
Banks are relying on deleveraging to survive, as opposed to growing their loan portfolio and actual earnings.
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If consumers follow their historical pattern, the current deleveraging cycle should last another 4 to 7 years.
Those losses were primarily the result of financing costs, which were reduced during a deleveraging in 2010.
Ironically, cyclical inflation is deflationary, particularly asset price inflation within the context of an extended deleveraging process.
The expansion of the deficit in 2009 absorbed a lot of the contractionary pressure of private deleveraging.
Monetary and fiscal easing should make this less painful, but this deleveraging still has years to go.
So the fourth, most important and most depressing lesson for the great deleveraging is that of realism.
When the private sector is deleveraging and interest rates are low, banks normally struggle to make adequate profits.
Or is the balance sheet recession simply continuing apace until the painful process of deleveraging runs its course?
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The report suggests that deleveraging has many years to go in countries such as the U.K. and Spain.
Lenders still tend to be frozen in place, which is a bad thing even if deleveraging is not.
Americans are reducing their overall debt burden, a process known as deleveraging that began with the financial crisis.
Arguably the deleveraging of the banks, the shrinkage in their balance sheets, has been transferred to the state.
It is hard to see this as a significant amount of deleveraging, especially when looking at longer term trends.
"When households become more interested in deleveraging and saving than borrowing, the economy grinds to a halt, " writes Kessler.
The odds-on status quo is for sluggish growth, high unemployment and continued deleveraging.
The second option for deleveraging is inflating away the debt through currency devaluation.
Second, it will facilitate further deleveraging even without an increase in household savings.
Remember that foreclosures and short-sales are a major part of the deleveraging process.
In contrast, America has largely avoided this trap by deferring its public-sector deleveraging into the future (see article).
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