Die verschleppte Krise

A balance sheet recession occurs when speculative bubbles burst, leaving private actors with underwater balance sheets and forcing a shift from profit-maximizing to debt-minimizing behavior. In this environment, monetary policy loses its efficacy as private entities refuse to borrow, regardless of interest rates. To prevent deflationary spirals, governments must act as the borrower of last resort, utilizing fiscal stimulus to offset private sector deleveraging. Japan’s post-1990 economic trajectory illustrates this phenomenon, demonstrating that persistent government spending can maintain GDP levels despite massive wealth losses. Economist Richard Koo notes that China currently faces a more severe version of this crisis, compounded by a shrinking workforce, a collapsing real estate sector, and geopolitical constraints. Unlike standard recessions, these periods require long-term fiscal intervention rather than reliance on quantitative easing, which often fails to stimulate the real economy.