“Mike Konczal highlights an interesting point in the latest White House Economic Report:
If you enjoy the content at iBankCoin, please follow us on TwitterThe White House also looks to be on team balance sheet. See the latest Economic Report of the President(pages 110 to 114):
“The standard approach in economics has been to assume that households consume about the same fraction of the increase in their wealth each year, regardless of its source… The severity of losses experienced during the recession that began in December of 2007 in both national output and in labor markets makes these estimates appear too small…
A growing economics literature highlights the importance of household debt balances in influencing the severity of economic slumps… A series of empirical papers attempts to quantify the effect of such deleveraging on consumption (Mian and Sufi 2010; Mian, Rao, and Sufi 2011). These papers broadly suggest that the levered nature of household housing assets amplified the effect of pure wealth losses from the crash in housing prices.”
