The authors are experts at crunching microeconomic data on American borrowing patterns and uncovering explanations for what they see. Their starting point is the remarkable statistic for US household debt, which doubled to $14 trillion between 2000 and 2007. This build up of debt was responsible for the ensuing havoc because of its effect on borrowers, Mian and Sufi argue.

To understand this argument, consider mortgage borrowers versus those who invest in their mortgages via bank deposits. The borrowers tend to be poorer than the investors, who have spare cash. As Mian and Sufi put it, a poor man’s loan is a rich man’s asset.

However, the risk distribution is highly asymmetric because mortgage holders have a senior claim on property while the borrowers’ equity claim is junior, and gets wiped out first. When US house prices fell from late 2006 onwards, losses were concentrated among the poorest segment of the population who had levered exposure, while the richest segment ““ the savers ““ were cushioned.

That explains why inequality increased during the Great Recession, but Mian and Sufi don’t stop there. Using economic analysis that reads like a detective story, they show how the evaporation of poor peoples’ wealth led to a collapse in spending, effectively causing the Great Recession itself. To show causality, they point out that spending initially fell the most in areas of biggest housing wealth declines.