4min chapter

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The Modern Empiricist Proving Old Wisdom On Household Debt And Recession - Amir Sufi

The Joe Walker Podcast

CHAPTER

The Negative Wealth Effect of House Prices on Consumption

When debt concentrates losses on indebted households, they stop spending. They tighten their belts and that's where we see these really nasty protracted recessions. It seems kind of obvious, but why does someone tighten their spending when their net wealth has been destroyed? Yeah, so there could be two reasons.

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