Private Debt is the Problem!

Savvides, Savvakis C. (2017): Private Debt is the Problem! Published in: Accountancy Cyprus , Vol. 2, No. 127 (July 2017): pp. 52-53.

Abstract

Cyprus suffers from a developing acute case of Balance Sheet Recession. This means that because of the excessive and quite unprecedented levels of private debt (3 to 4 times the size of the country’s GDP) weighing on households and corporations, it is practically impossible for the country to overcome the recessionary effects of the austerity conditions that were imposed since the bail-in in 2013 and which still constitute the core of the Government policy.

The article concludes that therefore the government should stand ready to have in place the institutions and provide for such fiscal measures which will mitigate and cushion the deflationary effects of the coming, but very foreseeable, recession.

• Item Type: MPRA Paper
• Language: English
• Keywords: Private Debt, Balance Sheet recession, Austerity
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; G - Financial Economics > G2 - Financial Institutions and Services; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development

References

1. Koo, Richard C (2015) “The Escape from Balance Sheet Recession and the Q.E. Trap”, Wiley.

2. Manison, Leslie and Savvides, Savvakis (2017) “Neglect private debt at the economy’s peril”, World Economics Journal, Vol. 18, No. 1, January–March 2017.

3. Hudson, Michael (2012) “The Road to Debt Deflation, Debt Peonage, and Neo-feudalism”, Working Paper No. 708, Levy Economics Institute of Bard College.

4. Vague, Richard (2014) “The Next Economic Crisis: Why It’s Coming and How to Avoid It”, University of Pennsylvania Press.

5. Savvides, Savvakis (2016) Overcoming private debt (unblocking the loan burdened real economy in Cyprus), The Journal of Private Equity, Fall, Vol. 19, No. 4: pp. 51-59.

6. Vague, Richard (2014) “Government Debt Isn't the Problem—Private Debt Is”, http://www.theatlantic.com/business/archive/2014/09/government-debt-isnt-theproblemprivate-debt-is/379865/, 9 Sept 2014.