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4 Case studies
4.1 The United States
4.1.1 The re-leveraging of the US economy
The role of debt accumulation in the US in the run-up to the financial crisis of
2008 is best seen in a longer perspective. The Federal Reserve’s Financial Accounts
(formerly Flow of Funds) provides a comprehensive look into the balance sheets
of US households, businesses and government. As shown in Figure 4.1, there
have been two peaks in aggregate debt relative to nominal GDP over the past
century. The first, in 1932-1933, epitomises the process of Fisherian debtdeflation.
18 The ratio of debt to nominal GDP spiked sharply because nominal
GDP collapsed under the weight of sizable declines in both prices and quantities.
As a consequence, all the components of debt in the layer chart moved higher.
Figure 4.1
400
US total debt by sector (% of GDP)
350
GSE
300
Financial
250
200
Corporate
150
100
50
Household
Public
0
1916 1930 1944 1958 1972 1986 2000 2014
Source: Authors’ calculations based on national accounts data.
The expansion in debt to its next peak at the beginning of 2008 was more gradual
and built upon increases in the numerator, not declines in the denominator.
18 This was identified in real time in Fisher (1933).
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