Thanks @Max Wiethe for reposting the interview with Richard Koo. 

It reminded me that in the past when his book " The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession" was published in 2009 a couple of years later the European governments went for the Austerity policy ( largely because of zeGermans). Austerity had the goal of reducing the debt levels of govs and to reduce spending, exactly the opposite policy of what Richard Koo would have advised doing. 

Read more here:
Read more here:

Same graph with a different title form the M&G interview: 

in red it sais "2014 Budget deficit"
in red it sais "2014 Budget deficit"


Richard explains how the classic economic theory was based on the assumption that there are no balance sheet problems. Turns out in realty there were quite big balance sheet problems.... And so if understand correctly he said that the policymakers ignored the fact that this important underlying assumption that made the theory useful was violated and so described the wrong policy (medicine) at the time. (This is a problem related to a question I asked with very little response about "How do you deal with "all models are wrong some are useful"")

The whole balance sheet recession idea wasn't (and perhaps still isn't) in the uni textbooks so since most of the people on the exchange went to uni well before '09. I got a couple of papers and recourses for you to read so you can Dig a little deeper into this fascinating idea. 

Dig Deeper:

Balance Sheet Recession as the Other-Half of Macroeconomics  R. Koo

A different policy response argument from the BIS: 

BIS Working Papers No 395 The financial cycle and macroeconomics: What have we learnt?  2012 


An interesting interview (and only 12 min) from 2015 with Mike Riddell from M&G's Bond Vigilantes

A lecture he gave at Yale (the RV interview is better but you know maybe you want to listen to this too its on the longer side thos 45 min.) 


Recent interview on Oddlots: interesting POV from 12:30 on. 
17:30 we get his POV on the European response. (talking again about the long-known issue that is in the Maastricht treaty)


There is always way more you could read but the interview + those links is probably are enough to have a useful understanding of it. 


PS: If possible it would be nice to see Jim Grant interview Mr Koo. ( I cant find his POV on mr Koo's work but i imagine he read his work)