Cookies?
Library Header Image
LSE Research Online LSE Library Services

Income inequality causes higher debt leverage among all but the richest households, and makes economies more vulnerable to financial crises

Kumhof, Michael, Ranciere, Romain and Winant, Pablo (2015) Income inequality causes higher debt leverage among all but the richest households, and makes economies more vulnerable to financial crises. USApp– American Politics and Policy Blog (12 May 2015). Website.

[img]
Preview
PDF
Download (459kB) | Preview

Abstract

The Great Recession, which began in 2008, was an economic upheaval the likes of which had not been seen since the Depression 80 years prior. In a new study which compares the lead-up to the Great Recession with the Great Depression, Michael Kumhof (with Romain Ranciere and Pablo Winant), finds that the growing inequality and the increasing household debt that preceded these crises made them much more likely. He argues that in the lead up to both crises the poorest experienced a massive erosion of their relative income position, and increased borrowing to cope, while the rich accumulated more and more financial assets backed by loans to the poor and the middle class. Applying his model to the near term, he suggests that unless policies are put into place to address income inequality, there will likely be a further increase in debt-to-income ratios for the lowest earners, with an increasing likelihood of further crises.

Item Type: Online resource (Website)
Official URL: http://blogs.lse.ac.uk/usappblog/
Additional Information: © 2015 The Authors; Online
Divisions: LSE
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Sets: Collections > LSE American Politics and Policy (USAPP) Blog
Date Deposited: 05 Jun 2015 08:57
Last Modified: 19 Jul 2020 23:12
URI: http://eprints.lse.ac.uk/id/eprint/62204

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics