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The developing recession in the United States

Author

Listed:
  • Wynne Godley

    (Levy Economics Institute of Board College, Annandale-on-Hudson (USA))

Abstract

This article points out that the expansion of aggregate demand in the US during the nineties was structured in a highly unusual way. There was a progressive tightening of the fiscal stance, so growth had to be powered by a uniquely rapid growth of private expenditure in excess of disposable income. This process was intrinsically unsustainable because it required very heavy borrowing, which caused a rise to record levels in debt/income ratios. If aggregate demand is to grow at an adequate rate in the medium term, there will have to be a large further fiscal relaxation. Yet fiscal policy alone cannot solve the problem because there has been a growing deficit in the balance of payments which will have to be corrected at some stage. The implications for the rest of the world of continued recession in the US could be very serious.

Suggested Citation

  • Wynne Godley, 2001. "The developing recession in the United States," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 54(219), pages 417-425.
    • Handle: RePEc:psl:bnlqrr:2001:45
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9954/9835
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    Citations

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    Cited by:

    1. Wynne Godley & Alex Izurieta, 2004. "The US economy: weakness of the "strong" recovery," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 57(229), pages 131-139.
    2. Amit Bhaduri, 2011. "A contribution to the theory of financial fragility and crisis," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(6), pages 995-1014.
    3. Steve Keen, 2013. "Predicting the ‘Global Financial Crisis’: Post-Keynesian Macroeconomics," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 228-254, June.
    4. Carlo D'Ippoliti & Alessandro Roncaglia, 2023. "Salvatore Biasco e le interdipendenze economiche e politiche (Salvatore Biasco and the political and economic interdependencies)," Moneta e Credito, Economia civile, vol. 76(303), pages 197-205.
    5. Steve Keen, 2015. "Post Keynesian Theories of Crisis," American Journal of Economics and Sociology, Wiley Blackwell, vol. 74(2), pages 298-324, March.
    6. Amit Bhaduri & Kazimierz Laski & Martin Riese, 2006. "A Model Of Interaction Between The Virtual And The Real Economy," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 412-427, July.
    7. Wynne Godley & Alex Izurieta, 2004. "The US economy: weakness of the "strong" recovery," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 57(229), pages 131-139.
    8. Amit Bhaduri, 2010. "A Contribution to the Theory of Financial Fragility and Crisis," Economics Working Paper Archive wp_593, Levy Economics Institute.

    More about this item

    Keywords

    Expansion; Recession;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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