... increasehasbeennotable,72Thisisnottodenysuccessfuleffortsbyanumber of countries,includingChina,toexpandmarketsinotherEME’s. Of coursethisstillleaves the broaderquestion of the robustness of the totality of thosemarketsin the event of aseriousdownturnin the AME’s.73ThisproblemisanalogoustothatfacedbyJapanesecorporationsin the 1990’s,aftermanyyears of debtfinancedinvestmentwhichprovedunprofitable.Koo(2003)stronglycontendsthat the weakness of investmentspendinginJapanin the 1990’swasduetothis“balancesheeteffect”, and wasnotduetoashortage of loanscausedbyaweakenedbankingsystem.74SeeBIS(2012)p29forafullerdocumentation.AlsoseeMcKinsey(2010)whoidentify the householdsectorinfive of the fourteencountriestheyconsiderashavingahighprobability of futuredeleveraging.TheyidentifySpain, the US, the UK,Canada and Korea.While the householdsectorsinBrazil,Russia,China and Indiawerenotjudgedtobeoverleveraged,notethat the dataconsideredextendedonlyto2009.Thus the reportmissed the recentsharpincreasesinhouseholddebtlevelsinthosecountries.22 and mightwellhaveoutpaced the capacity of the localfinancialsystemstoaccuratelyestimate the capacity of borrowerstorepay.Indeedbymid2012, the percentage of nonperformingcarloans ... because the value of available collateralreflectsthreecomponents; the marketvalue of the collateral, the haircutimposedon the borrower and the velocity of turnover (rehypothecation )of ... be58AsEME’sbegintoindustrialize,theyinitiallyhave the benefit of rapidurbanization(asagriculturalproductivityrises) and the internationaltransfer of technology.Overtimeboth of these“catchup“factorssupportinggrowthbecomelessimportant.59Itisimportanttonotethat the debatewaswith the Keynes of the “Treatise” and notyet the Keynes of the “GeneralTheory”.In the TreatiseonMoney,Keynescalledformonetaryauthoritiestotake“extraordinary”,“unorthodox”monetarypoliciestodealwith the slump.Kregel(2011)p1,contendsthat The unorthodoxpoliciesthatKeynesrecommendsareanearlyperfectdescription” of the ultraeasymonetarypoliciesfollowedinJapan, and morerecentlyinothercountries.Recall,asnotedabove,thatKeynes’enthusiasmforsuchmonetarymeasureshadfadedby the time of the GeneralTheory.18closely...