De-leveraging firms and households suffering long underutilization or under-employment tend to lose their non-tangible or human capital. In Japan, this has been observed especially in small to medium-sized enterprises: loss of entrepreneurship, loss of human networks in skilled manufacturing, and loss of access to technological advances. In the United States, the long-term unemployed or underemployed risk losing their human capital.
Problems in financial intermediation The third consequence of severe and prolonged balance sheet adjustment is the deterioration in financial institutions’ efficient functioning as financial intermediaries.