“Deleveraging” is an ugly word for a nasty journey: that towards lowering excessive debt after a credit bubble. What makes the effort particularly difficult now is that it affects the US and other large economies. This is a global, not just a local, event.
In January, the McKinsey Global Institute published an updated version of its invaluable research on deleveraging.* It is a sobering document: it shows that deleveraging has a long way to go; happily, it also shows that the US economy is the most advanced in deleveraging.
One cannot get out of debt by taking on more debt. How often have you read such remarks? It is a cliché. As the McKinsey Global Institute study points out, it is also false. Sweden and Finland, both hit by big crises in the early 1990s, are good examples of why this is so.