Krugman: Recovery Requires Restoring Household Balance Sheets?

I have been pointing to the debt problem for some time, as key to recovery ...
HT Calculated Risk, also Paul Krugman is pointing to this very problem at his presentation in Spain on March 17th. The video should be here. Click on chart to enlarge (seems to be originated by Credit Suisse) ...

I have been sceptical of taking care too much of household balance sheets in Latvian context, probably wrong, but there are possibly other more important issues, like - how to serve foreign denominated debt, in first instance ...? However, in the global context, i believe, it is key for any sustainable recovery.

Although I feel myself (as an investor) like in centrally planned economy at the very moment, but Keynesian fiscal stimulus are important right now to prevent debt deflation. We need new credit-worthy borrowers, as without true innovation and progress the outlook is grim ...

"A Tale of Two Depressions"? Stay tuned ...