Debt deflation is a theory of economic cycles, which holds that recessions and depressions are due to the overall level of debt shrinking (deflating): the credit cycle is the cause of the economic cycle.
The theory was developed by Irving Fisher following the Wall Street Crash of 1929 and the ensuing Great Depression. Debt deflation was largely ignored in favor of the ideas of John Maynard Keynes in Keynesian economics, but has enjoyed a resurgence of interest since the 1980s, both in mainstream economics and in the heterodox school of Post-Keynesian economics, and has subsequently been developed by such Post-Keynesian economists as Hyman Minsky "The Financial Instability Hypothesis"(1992) ] and Steve Keen.
Read more about Debt Deflation: Fisher's Formulation, Subsequent Developments, Mainstream Interest, Similar Theories, Solutions, Forward Year Tax Receipts
Famous quotes containing the word debt:
“Live within your means, never be in debt, and by husbanding your money you can always lay it out well. But when you get in debt you become a slave. Therefore I say to you never involve yourself in debt, and become no man’s surety. If your friend is in distress, aid him if you have the means to spare. If he fails to be able to return it, it is only so much lost.”
—Andrew Jackson (1767–1845)