Nick Gardner: In 2008, private debt in the US grew $4.1 trillion but in 2010 shrunk $2.85 trillion as banks decreased their lending as a result of the housing crash. When subtracted from GDP, this fall in debt equated to a 38 per cent reduction in aggregate demand, leading directly to the “great recession” and unemployment hitting its highest level in almost 30 years. “This is what people find so confusing,” says Keen. “When you look at GDP numbers in the US, they’re not bad. At the beginning of 2008, US GDP was $14.25 trillion and today it has GDP of $14.75 trillion. That’s stagnant growth but doesn’t explain the enormous depths of the US downturn. It only begins to makes sense when you look at the fall in aggregate demand.”
via Keen to be heard.