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:
“Even the poor student studies and is taught only political economy, while that economy of living which is synonymous with philosophy is not even sincerely professed in our colleges. The consequence is, that while he is reading Adam Smith, Ricardo, and Say, he runs his father in debt irretrievably.”
—Henry David Thoreau (1817–1862)