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The Age of Balance Sheet Recessions: What Post-2008 U.S., Europe and China Can Learn from Japan 1990-2005

Richard C. Koo
Chief Economist
Nomura Research Institute
Tokyo
March 2009

1
Exhibit 1. US Economy Is Deteriorating Rapidly
70
72
74
76
78
80
82
84
86
98
99
00
01
02
03
04
05
06
07
08
09

3.5 4.0 4.5

5.0 5.5 6.0 6.5 7.0

7.5 8.0 8.5

Capacity Utilization
(left Scale)
(%, Seasonally adjusted, inverted)
Unemployment Rate
(right scale)
Sources: US Department of Labor, FRB
(%, Seasonally adjusted)
2
Exhibit 2. EU Economic Sentiments Are Worsening
65
70
75
80
85
90
95
100
105
110
115
1202000
2001
2002
2003
2004
2005
2006
2007
2008
2009
(Seasonally adjusted)
Source: Ifo Business Survey, European Commission
Ifo Business Climate
Euro Area Economic Sentiment

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Giovanni Sestilileft a comment

Great presentation even though rather difficult to understand if not familiar with Koo's concept of Balance Sheet Recessions. I strongly recommend his book "The Holy Grail of Macroeconomics", where he thoroughly describes the Japanese recession of the so called "Lost Decade" (a term that Koo disagrees with), and where he illustrates why Balance Sheet Recessions are a different animal and why the
08 / 11 / 2010
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samgreenlawleft a comment

Slide # 13 shows the $1.5-trillion Savings-to-Investment shortfall from tax cuts & ZIRP. Bingo.
02 / 01 / 2010
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fangtengleft a comment

Great analysis on Japan's recession...and can be easily related to the current global recession...
11 / 13 / 2009
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