"While the highly indebted and the newly “asset-poor” have good reason to spend less than before the crisis, creditor households have no reason to spend more. I

"While the highly indebted and the newly “asset-poor” have good reason to spend less than before the crisis, creditor households have no reason to spend more. Indeed, the collapse in interest rates in a slump lowers their incomes and so is quite likely to make them want to cut back on their spending, too. The aggregate effect of these changes in behaviour is, of course, a rise in the desired household rate and so the desired financial surplus of the household sector." Read this carefully, because I'm fairly certain the author is trying to disguise something. His argument is this: Households cut spending and drive down rates, therefore creditors have less income and cut spending, therefore, creditors demand higher rate and more household debt. You can see the sleight of hand, creditors desiring a higher rate does not force a higher rate. In fact, as he already admitted, debtor payments have pushed down the rate. What the author fails to admit is that rates stay low AND debtors pay down their balances. Debtors do not need to somehow 'outsave' their creditors in order to pay down their debt. They simply pay down their debt. There may be arguments for stimulus packages and other counter-cyclical govt spending, but the author doesn't make a fair point for them. I certainly don't see why it would be necessary for govt borrowing to offset an increase in the private savings rate.