Stage 5: People and Their Countries Are Poor and They Think of Themselves as Poor. This is when the gaps described in Stage 4 cease to exist and the reality of the country’s situation is hitting home. After bubbles burst and deleveragings occur, private debts grow, while private sector spending, asset values, and net worths decline in a self-reinforcing negative cycle. To compensate, government debt and government deficits grow, and central bank “printing” of money typically increases. Central banks and governments cut real interest rates and increase nominal GDP growth so that it is
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