UT Bondman

Irving Fisher on Debt, Deflation, and Depression

What causes depressions is widespread insolvency that is not forcefully corrected in a timely manner. Somehow (probably due to the laziness of people in general) the impression has sunk into the consciousness that depressions are all deflation related...there have been others that have been related to hyper-inflations as well. As Anna Schwartz (sp?) has commented recently, Bernanke's understanding of the Great Depression seems to be lacking, as he seems intent on addressing liquidity problems alone. Too bad for all of us as explicit and implicit leverage in too many portfolios in the system is showing him most impotent.