And let me guess, counties with economies dominated by autos and steel usually suffer bigger job losses in recessions than counties dominated by hospitals and colleges. Does that tell us anything about what causes recessions? Doesn’t EC101 also teach that correlation doesn’t prove causation?
Let’s suppose recessions were caused by tight money, not balance sheet problems. And let’s suppose that tight money reduces nominal income. And let’s suppose that most debts are nominal, not indexed to inflation. In that case wouldn’t you expect tight money to lead to bigger spending declines in highly indebted areas, even if debt played no role in causing the recession?
Fallacy of composition
I don’t know whether he’s examined the study or finds the results inherently incredible but that’s certainly a vehement response.