Question

For this assignment, write a 5 paragraph essay that argues and supports the meaning of "Beautiful Deleveraging". As part of that process, discuss why the concept makes sense or does not, and justify your views.

Answer 1

Deleveraging happens when after the long term debt peak. Spending cuts, income fall,debt repayments rise, credit disappear, asset price drop,banks get squeezed .Credit rise up and borrower's cant borrow to make dept repayments. Lenders stop lending and borrowers stop borrowing . The economy exist as no longer credit worthy.The solution for this situation are,

1. Austerity.
2. Reduce the dept.
3. Redistribute the wealth.
4. Print money.

Beautiful Deleveraging happens when when this four solution for deleveraging are balanced correctly .

• Depts decline relative to income.
• Real economic growth is positive.
• Inflation is not a problem.

A Beautiful Deleveraging balances the three options . There is a certain amount of austerity, which means cut spending by pull in belt and spend less policy. Also there is a certain amount of debt restructuring and there is a certain amount of printing money . When all these done in a right mix, it doesn't too much delation or too much depression . There is slow growth, but it is positive slow growth at the same time the ratio of debt to income go down. That's Beautiful Deleveraging.

This can leads to social and economic stability once again when done in correct proportions helps to regain economic growth. The mentioned rules below helps to create the Beautiful Deleveraging,

• Don't have debt rise faster than income.
• Don't have income rates faster than productivity.
• Do everything to rise productivity as that is what matters most.