27 - Claudio Borio on Financial Stability, the Triffin Dilemma, and International Monetary Policy
Macro Musings with David Beckworth
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Is Deliveraging Necessary?
Some of these policies, rather than helping eing, may actually hinder it. In the bottom line is that if during financial bats, deliveraging is unnecessary. And we have quite a lot of empirical evidence to that effect. Deliveraging is a necessary condition for a self sustained and strong recovery. It's much easier to keep providing credit to companies that are not in very good shape because you don't want to recognize losses. That would mean reducing the credit supply or raising the price for for the better, for the better customers.
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