Paul Krugman says that America — with its lukewarm stimulus — is doing better at deleveraging than more austerity-prone nations.
That is broadly correct. Austerity post-bubble is a cure for nothing. But America is still doing very badly. In the deleveraging horse race, America is “doing better” than horses that ditched their riders into the mud.
From the Economist:
And — given that I know that the UK’s total-debt-to-GDP is more like 1000% — these figures might understate the problem.
Of course, progress in deleveraging is a slow process, as the example of the British Empire teaches.
But I fear that every single case presented is probably closer to Japan in the 1990s than Britain in the 1950s. Central banks and governments the world over have concentrated on sustaining broken systems and zombie banks, thereby sustaining the bubble-level prices, a process that Nassim Taleb described in the Bed of Procrustes as “amputating limbs to fit clothes”.