CROSS POSTED on THE ECONOMIC MAVERICK
Many of the most consistently prescient & astute thought leaders that the Economic Maverick follows, such as Nouriel Roubini, Yves Smith, Ed Harrison and others have maintained since 2008 that the current recession was quite different from traditional recessions because the overhang of private sector/household debt would (short of massive debt restructuring) seriously impede whatever official "recovery" ensued after the economy hit a technical bottom in mid 2009.
Increasingly, the smartest wonks and academics have recognized that household debt is at the heart of the weak US Economyand have called this "the balance sheet recession", with some of the most comprehensive work from Richard Koo, whose studies span not just the current US economy but also other countries experiencing balance sheet recessions, such as post-1990 bubble Japan. Among mainstream economists with large media platforms, Paul Krugman has also recognized the balance sheet recession theory / reality, as have Rogoff and Reinhart in their critically acclaimed book, This Time It's Different. However, we should note that among the earliest adherents to this theory was not a formal economist, but a true visionary who predicted in late 2007 / early 2008 thevery nature of the upcoming post-recession stagnation well before not only the Sept 2008 meltdown, but before the officialdom had accepted that there even was a recession!
Last week, Ezra Klein, the in-house youthful turbo-wonk at the Washington Post, touched on this narrative in a blog post, calling it a "house-hold debt crisis" , a name which he recognized as not really "sexy enough" to capture the public's imagination - though I find it preferable to the uber-wonky "balance sheet recession". Ezra, whose growing potential audience is far wider than many pure financial/econ blogs, reached out to the public asking for names with broader public accessibility. Nouriel Roubini suggested on a tweet "zombiehousehold crisis". That may be an interesting name as well, but what proportion of the general public would actually identify with being called a "zombie"? And who in the general public understands the concept of financial zombies? We suspect few would, dis-spite the best efforts of this blog to explain our current Financial Zombieland.
The Economic Maverick has its own contribution to the name-game:
How about: "SERVITUDE to Banks Recession"?
An upside to the name "SERVITUDEto Banks Recession": It's very clear who the bad guy is (although Ezra officially positions his blog post as "solution neutral", I don't see how we get out of this without debt restructuring, a position which I optimistically hope Ezra eventually agrees with! ) , and therefore steers any potential pro-freedom anti-slavery debt-restructuring solutions of restitution to households to come from banks (slave holders). Ideally, banks would be required to make principle reductions and thereby taking hits on their balance sheets (not governments providing cash), thus freeing households from their proverbial debtors prison. Furthermore, it is the Banks themselves who have fought this tooth and nail since the 2008/2009 crisis and subsequent bailouts, since any restructuring of household debt (which are assets on a bank's balance sheet) would likely impair or even wipe-out their equity, necessitating an FDIC style controlled-liquidation/receivership. We shouldn't forget that the Iron Fist of the State, under both the Bush and Obama Treasury Departments, has been an accessory to household Debt Slavery through its "regulatory forbearance" or "extend and pretend" policy of allowing banks to hold these mortgages at bubble prices as they post collateral and receive support through the Federal Reserve, an effective Corporate Communist system of "bailouts without restructure" giving us "socialized losses with privatized profits". Finally, the "SERVITUDEto Banks" name might be a good accompaniment to the ongoing mortgage fraud prosecution efforts, which could be the closest thing there is to a magic bullet cure of forcing a balance sheet re-structuring and thereby finally exit our current nightmarish balance sheet recession / household debt crisis / zombie household crisis / SERVITUDE to banks recession, in spite of Team Obama's reluctance,or some may say outright hostility,to this magic bullet.