Digging Out of the Debt Hole

Americans have fixed their own balance sheets. Can they now fix the economy?

Illustration by Harry Campbell for TIME

Americans have fixed their own balance sheets. Can they now fix the economy?

Economic downturns that follow a financial crisis tend to be very, very painful. That's because the bursting of a large debt bubble is followed by a long period of hunkering down, when everyone tries to repair their personal balance sheets. That means no spending and thus no growth. Historically, this process can take 10 years or more--hence the term lost decade.

Is that the situation in the U.S. today? You might think so, judging from the dismal growth and employment data coming out every month. But a chart released in June by McKinsey makes me think the picture could be somewhat...

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