Auto Sales Differ In Countries With High or Low Household Debt

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Krugman presents a graph done by others who are trying to explain the slow US recovery. The graph shows that auto sales rebounded after the recession in low household debt countries but did not rebound in high household debt countries. The explanation for the slow recovery is explained by household debt deleveraging.

This explanation leads to the problem of government's role in fixing the household debt problem. The focus has been on fixing the problem of bank debt and Krugman plans to direct his attention to how we can fix the household debt overhang problem.