One is leverage.

One explanation is that the advanced economies had taken on too much debt and needed to deleverage, contributing to a pattern of public sector underinvestment and depressing consumption and private investment as well. But deleveraging is a temporary process, not one that limits growth indefinitely.

What this line of research explicitly does not tell us is that deleveraging will restore growth by itself. No one believes that fiscal balance is the whole growth model anywhere.

The US is adjusting structurally and generating real (inflation adjusted) GDP growth (though well below its potential annual rate of 3 3.5 ). The tradable sector is expanding and is not dependent on leverage to generate aggregate demand.

Emerging Europe s Deleveraging Dilemma

The initial export shock was likely to reduce growth. The sudden deleveraging imposed by foreign creditors requires the current account balance to adjust further and faster.

But there remains the question of whether consumption share growth is sustainable that is, whether it is the result of income share growth or rising leverage. If it is supported by excessive leverage, effectively shifting future consumption to the present, China could face a significant slowdown or even a major crisis.

So consumers got overleveraged.

Seeing such data, one cannot help but be stupefied. According to the statistical data of Suning Financial Research Institute, the leverage ratio of Chinese households was only 3 in 1996 and 18 in 2008. But this figure doubled in just six years since the trend of rapid growth of leverage ratio set in, reaching 36.4 . By the third quarter of 2017, the leverage ratio of households has reached 48.6 .

Regulators are already talking about imposing leverage ratios, as well as limits on risk weighted assets. If they follow through, as I expect, there will be no return to the strategies of the last two decades.

Much has been made of domestic consumption as a driver of Chinese growth in the future. But Justin Lin, a former World Bank chief economist, has argued forcefully that investment will and should remain a key growth driver, and that domestic consumption in China s growth pattern should not be pushed beyond its natural limits into a high leverage model based on rising consumer debt.

But it was a bubble and a highly leveraged one at that. While periodic bubbles may be unavoidable, and no bubble is without consequences, a highly leveraged bubble tends to cause far more damage, owing to its impact on the real economy and the duration of the deleveraging process.

It's because there's a little more leverage in terms of the Chinese.

Given these trends, the search for more robust growth models will take much longer and be more complicated than many recognize especially as the world economy pivots away from unfettered globalization and high levels of leverage.

It shows leverage, trended out from 1919 to 2009.

Leveraging resources and results for children

That pattern came to a sudden stop in the financial crisis of 2008. Private sector leverage declined and public sector leverage reached and exceeded sustainable limits, with Greece being only the most extreme example.

As a result, predictions for the United States where household deleveraging continues to constrain economic growth have fallen short only modestly. The April 2010 report forecast a US growth rate of roughly 2.5 annually in 2012 2013 current projections put the rate a little higher than 2 .

If public sector deleveraging is not a complete growth policy and it isn t why is there so much attention on fiscal austerity and so little action (as opposed to lip service) on growth and employment?

Official Development Assistance (ODA)

And yet the illusion continues to entice policymakers. That is why De Gregorio s book should be required reading for all central bankers.

At the end of the day, resolving private sector leverage problems by fully socializing private losses and re leveraging the public sector is risky. At best, taxes will eventually be raised and spending cut, with a negative effect on growth at worst, the outcome may be direct capital levies (default) or indirect ones (inflation).

A number of ministers also stressed that a key role of aid was to leverage additional private sector investments.

And it has all kinds of levers and ball bearings and gadgets and gauges.

The reason is simple while base money is soaring, the velocity of money has collapsed, with banks hoarding the liquidity in the form of excess reserves. Ongoing private and public debt deleveraging has kept global demand growth below that of supply.

We started with a motor with a little lever, a little force transfuser.

What policy levers and instruments can be used to provide appropriate incentives?

Recent IMF research suggests that, given excess capacity, governments would probably benefit from substantial short run multipliers. More important, the focus on investment would improve prospects for long term sustainable growth, which would enable governments and households to pursue responsible deleveraging.

Without disputing the need for some deleveraging, a new incarnation of the Vienna Initiative Vienna 2.0 seeks to make the process orderly. After all, excessive and chaotic deleveraging by lenders to emerging Europe and the ensuing credit crunch would destabilize this economically and institutionally fragile region.

One is that, facing declining growth, policymakers will resort to excess investment or leverage (or both), creating instability. The other is that they will resort to neither, and that no alternative growth engines will have been started, leading to an extended slowdown with unpredictable political consequences at home and serious economic consequences abroad.

Meanwhile, a highly interdependent and (now) less dynamic world economy has been limiting the scope for external growth drivers. Accordingly, even countries with sound balance sheets and manageable leverage have experienced a growth slowdown.

With insufficient profits to use for investment, nonfinancial corporations will become increasingly dependent on external finance. As their leverage ratios increase, so will their risk premiums, causing their borrowing costs to rise and undermining their profitability further.

Don t go there in the first place avoid whatever it is whether external pressure under the gold standard, asset price bubbles, or leverage and panic cycles such as that of 2003 2009 that creates the desire to deleverage.

And the problem with leverage is it makes the U.S. financial system look like this.

The new aid modalities could give the United Nations greater leverage on how resources were used in the pursuit of the Millennium Development Goals.

When the deleveraging cycle begins, the private sector starts to adjust structurally a pattern clearly seen in the data on growth in the tradable side of the US economy. Muted wage growth increases competitiveness, and underutilized labor and capital are redeployed.

The first key factor is deleveraging and the resulting shortfall in aggregate demand. Since the financial crisis began in 2008, several developed countries, having sustained demand with excessive leverage and consumption, have had to repair both private and public balance sheets, which takes time and has left them impaired in terms of growth and employment.

The cause of the latest currency turmoil is clear In an environment of private and public deleveraging from high debts, monetary policy has become the only available tool to boost demand and growth. Fiscal austerity has exacerbated the impact of deleveraging by exerting a direct and indirect drag on growth.

1. Don t go there in the first place avoid whatever it is whether external pressure under the gold standard, asset price bubbles, or leverage and panic cycles such as that of 2003 2009 that creates the desire to deleverage.

In the US, the story is one of continued recovery as the headwinds slowing growth dissipate. State and local government budgets are improving, the housing market is strengthening, and households are deleveraging and repairing their balance sheets.

Several possibilities not mutually exclusive come to mind. One is that some policymakers think that fiscal balance really is the main pillar in a growth strategy Deleverage quickly and get on with it.

It's starting to play with them as levers, to get conscious about them and to move to different places.

If you put up a prize, you can get literally a 50 to one leverage on your dollars.

The Secretariat leverages the technologies it has in place to protect its own systems and anticipates increasing this leveraging effect for the benefit of the missions within current resources.

Second, the factors slowing US growth are chronic. These include slow but persistent private and public sector deleveraging rising oil prices weak job creation another downturn in the housing market severe fiscal problems at the state and local level and an unsustainable deficit and debt burden at the federal level.