Financial sustainability of an economy exploratory remarks

Overview & Synopsis

The financial crisis has revealed that the growth regime characterizing the world before 2008 was unsustainable. In effect, despite the bright performance recorded in term of GDP increase during the 2003‐2007 period, wealth was decreasing. The increased indebtedness of households was matched by overvaluated assets. When assets prices returned to earth the sheer reality appeared: we were poorer. This episode remember us a fundamental, although intuitive, fact: a process is sustainable if it does not lead us to consume so to speak the capital out of which we obtain our income. It is why an indicator of sustainability is so important to evaluate the macro economic performance of an economy and the strategy of countries (...).