Radical Uncertainty - Mervyn King
The Joe Walker Podcast
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The Importance of Debt Deflation in the Early Nineties
In 1994 you gave a presidential address to the European Economic Association titled Debt Deflation Theory and Evidence. Can you just give me an outline of the argument you made in that address and why it was important? I think conventionally the idea was that if people had become rather pessimistic animal spirits were low then businesses would invest less, so we'd expect the business cycle to be driven by investment. It seemed to me that actually the data suggested that in the early nineties the causes of the debt to the recession were much more to do with weak consumption.
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