Richard C. Koo.
The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession, Revised and Updated edition.
Singapore: John Wiley & Sons Asia Pte. Ltd., 2009.
Book information: Publisher; Google Books; Google Books with preview; Amazon.com; Amazon.co.uk.
Richard Koo may have found the "Holy Grail" (i.e., quest object) of macroeconomics: he may have solved the problem of what caused the Great Depression in the United States during the 1930s: it was a Balance sheet recession.
In addition to his explication of the nature of balance sheet recessions, Koo's book is useful in providing an expanded framework for understanding the macroeconomy. Koo's expanded view notes two phases of economic cycles: the traditonally understood period when firms maximize profits (which Koo calls the yang phase) during which monetary policy (for example, central bank raising and lowering of interest rates) is effective; and the less well understood period when firms and households minimize debt in order to repair balance sheets (which Koo calls the yin phase). When firms and households are paying off debt they are not interested in borrowing funds to finance growth regardless of how low interest rates may fall (hence monetary policy is not effective in stimulating economic growth). A period when many/most firm minimize debt following an asset price bubble collapse (e.g., USA 1929, Japan 1990, USA 2007-2008) is when balance sheet recessions can occur (if effective policy action is not taken). The balance sheet recession is the appropriate time for aggressive fiscal policy and is when it is most effective (Koo is not advocating the the use of fiscal policy as was done in the U.S. during the post-war 1940s-1970s period to "fine-tune" the economy and smooth out business cycles of the yang phase, which is now recognized as contributing to the inflation of the 1970s, along with many other factors).
Some Richard Koo links:
Richard Koo, Wikipedia.
Richard Koo, Institute for New Economic Thinking (INET).
(This page has links to many talks by Koo.)
Richard Koo, "The world in balance sheet recession: causes, cure, and politics," Real-World Economics Review, Issue No. 58, 12 December 2011.
This paper is an excellent summary of the data and ideas Koo presents in his book (which is often repetitive).
Richard Koo, "No Time to be Complacent: What Post-2008 U.S., Europe and China Can Learn from Japan 1990-2005," Lowy Institute for International Policy, Sydney, Australia, February 2011.
Part 1; Part 2.
The longer talk by Koo at the Lowy Institute (above) is a very good presentation of his data and ideas, in contrast to the shorter (and thus, I think, less satisfying, though still good) talks at INET meetings (below).
Richard Koo speaking at INET Bretton Woods, 09 April 2011:
INET Bretton Woods 2011 Program webpage; Koo spoke during the session: Getting Back on Track: Macroeconomic Management after a Financial Crisis (this page has links for the videos/slides/papers that preceeded and followed Koo along with the Discussion period); Download Koo's slides [PDF].
Richard Koo speaking at INET Berlin, 14 April 2012:
INET Berlin 2012 Program webpage; Download Koo's slides [PPT]; Download Koo's paper [PDF].
Paul Krugman endorsed Richard Koo's analysis of recent U.S. economic stagnation as due in some degree to a balance sheet recession in this talk: "The Return of Depression Economics, Part 2: The eschatology of lost decades," London School of Economics, 09 June 2009.
Other links:
Irving Fisher, "Debt-Deflation Theory of Great Depressions," Econometrica, 1933.
[Link is for a webpage at the St. Louis Fed from which you can download a copy of this paper.]
Koo explains why Fisher's analysis in this Debt-Deflation paper is inadequate on pages 180-184 of his book.
Irving Fisher, Wikipedia.
Hyman Minsky, Wikipedia.
Steve Keen is one of the more prominent currently active economists to call attention to mainstream academic economists' avoidance of the topic of (non-government) debt and debt's macroeconomic effects.
Professor Stephen Keen, Kingston University, London.
Steve Keen's Debtwatch, his blog.
Steve Keen, Wikipedia.
Steve Keen. Debunking Economics, second edition. London: Zed Books, 2011.
[Publisher; Google Books; Amazon.com.]
Steve Keen: Why Economics Is Bunk, BBC Radio 4, 10 June 2012.
Tracking the Global Economy, Federal Reserve Bank of St. Louis.
This webpage has graphs of major macroeconomic variables since 2009 for the G7 countries plus Australia (illustrating how those economies have or have not recovered since the 2007-2008 financial crisis).
Some Wikipedia articles:
Paradox of thrift
Fallacy of composition
Great Depression in the United States during the 1930s
Causes of the Great Depression
Recession
Balance sheet recession
Depression (economics)
Japan's Lost Decade
Dot-com bubble
Early 2000s recession
United States housing bubble
Financial crisis of 2007–2008
Causes of the 2007–2012 global financial crisis
Great Recession
Causes of the Great Recession
Comparisons between the Great Recession and the Great Depression
Liquidity trap