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Chart of the Day
Posted at 11:45 a.m. on Dec. 5, 2012
— Cullen Roche explains the dangers of implementing deficit reduction too quickly with this chart, showing the collapse of private investment “to horrific levels” in the recession.
“But it has slowly crawled back. I’ve described this as one of the main reasons why the USA is not headed for a Japan-style 20 year malaise… But I don’t think we’re ready to make a baton pass just yet from full public sector to private sector driven recovery.”
“I think the economy remains extremely fragile and is still recovering from the consumer driven credit crisis. The balance sheet recession is still very much alive… So a substantial decline in the government’s deficit could seriously impact aggregate demand and help contribute to a pullback at the consumer level. And if that were to happen we’d see that recovery in private investment turn south very quickly.”