Deflationary spiral

Classic deflationary spiral

Deflationary spiral describes a self-reinforcing economic downtrend. A classic deflationary spiral is initiated due to falling prices. This causal relationship is, however, greatly simplified and incomplete, because events must have already taken place beforehand which trigger a falling price trend or which triggered the expectation of a falling price trend. Examples from economic history point to different triggers.

Need for deflationary measures

During a gold standard was restrictive monetary policy necessary when gold flowed due to current account deficits abroad in order due to a falling money supply to reduce domestic supply of credit, money supply and prices and due to lower wages and prices trade balance to activate and gold inflow (from abroad). Why and how deflation can arise in a fiat money system is rarely explained , even by economists like Alan Greenspan . Greenspan stated that "an end to budgetary discipline will eventually lead to an increase in interest rates, a decrease in capital investment and a decrease in productivity gains" ( classic crowding-out ). This is countered by the fact that the discount policy, i.e. the basic amount of money supply as well as its price, the interest rate ( federal funds rate ) is set or influenced by the respective central bank. In the periphery of the euro zone, the deflationary development is explained by the necessity of internal devaluation and the necessary adjustment processes .

According to Wilhelm Lautenbach , overall economic demand and corporate productivity behave in exactly the opposite way. Economies that have a general current account deficit (and thus finance current account surpluses of other countries) and their credit-granting institutions tend to have a liquidity problem and are therefore dependent on foreign capital. In order to reduce the dependency on foreign investors, it may be appropriate to switch to a drastic austerity policy (especially when exchange rate devaluations are not desired or possible). This then of course results in a deflationary tendency.

The bursting of (mostly credit-financed) speculative bubbles (asset deflation) develops a threatening tendency (see also balance sheet recession ) when both monetary policy and fiscal policy fail to take mitigating (compensatory expansionary) action.

Trigger / Booster

Declining net borrowing by public authorities (complementary sectors receive less income from it).
Reluctance to spend on the part of private households (debtors) or increase in savings (increase in the savings rate : increase in the transaction and precautionary fund) in terms of liquid funds in private households.
Withdrawal of private individuals from less liquid forms of investment (see also liquidity trap ), typically also from corporate bonds (increased consolidation problems for companies).
Reluctance to invest on the part of companies (noticed and still expected decline in overall economic demand as well as cautionary spending restraint and downsizing, falling production, cautious efforts by companies to increase their liquidity - increased efforts to repay loans - falling net borrowing by the corporate sector).
Some companies can still not adequately service outstanding credit debts (asset devaluations in the bank balance sheets).
Banks' liquidity problems ( credit crunch ).
Loans are rarely granted and if they are, the creditworthiness is checked rigorously - private investments also continue to decline as a result - falling income of other bank borrowers due to falling (credit-financed) expenses.
Falling liquid funds within the economy as a whole, falling money supply, falling money demand (with rising real interest rates no investment stimulus - see investment trap ).
Falling production, rising unemployment, decline in macroeconomic purchasing power, further falling investment by companies.
State social benefits are being reduced - state income continues to fall.

Risked savings pressure from the debt brake

An increase in the saving rate of private households leads to a further drop in demand from commercial enterprises.
The acceptance of offers from companies is generally falling - their warehouses remain full - reorders are no longer or, if so, only rarely (a large number of sectors where there is only a reduced demand closes).
Countries and companies in countries that have a passive current account and balance of payments generally have fewer opportunities for credit financing and during a global deflationary phase, the willingness and / or possibility of foreign creditors to provide capital in this regard decreases (or typically has an unfavorable effect on [foreign exchange] capital flight on the liquidity and solvency of domestic credit institutions - to the extent that this is the only reason why lending is declining in the economy as a whole = declining investments - also further declining expenditure, income, expenditure, etc. In open economies, the deflation spiral becomes even more acute when the deflationary tendency affects all countries.

A problem later countermeasure

If the private sector has become over-indebted during the crisis, countermeasures to the economic situation do not take effect immediately, as private households initially seek to ease their over-indebtedness so that “more money” does not initially reach the real economy.

Individual evidence

^ Hans Gestrich: New credit policy. Stuttgart and Berlin 1936. ( PDF ) p. 56:
“That one can influence the price level by increasing or authorizing the rate at which the central bank discounts bills is a wisdom that is more than a hundred years old. Traditional credit policy looked at this effect from the point of view of currency protection. By lowering the price level by increasing the discount, one acts on the balance of payments in the sense of an activation, "improves" the exchange rate and - if the international gold currency system prevails - attracts money from abroad. Recognition of this connection has long made discount policy the classic instrument of central bank policy . It has long been evident that the setting of the discount from the point of view of "protecting the currency" is often not in line with internal economic needs. "

^ Alan Greenspan: My Life for Business. Frankfurt 2007. ( online ) p. 263: "I could never have imagined how deflation would come about under a fiat currency."

^ Alan Greenspan: My Life for Business. Frankfurt 2007. p. 271. ( online )

↑ Jens Weidmann on the subject of deflation: Video ( Memento of the original from August 21, 2014 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. from the event "Weidmann meets teachers" @1@ 2

^ Wilhelm Lautenbach: About credit and production. Frankfurt 1937. p. 18:
How does the credit system work when the state finances large expenditures through credit? Where do the funds come from?
“Most of the people who ask the question, and it is by no means just lay people, think that there is some limited supply of money or credit. This notion is usually linked to the worried question whether the state might not tighten credit for the economy through its credit claims. In truth, however, it is exactly the opposite. When the state takes credit on a large scale, the entire credit economy is loosened up. The money and credit markets are becoming liquid, entrepreneurs are becoming liquid, their bank loans are decreasing, business deposits are increasing [...]. "

↑ Advisory Council on the Assessment of Overall Economic Development: Annual Report 1966/67: Expansion and Stability (PDF; 7.2 MB) p. 87, item 154:
"If funds flow out of any areas, and this applies to all credit and capital markets ( Deficit areas), so that there is a need for financing here [for example in the case of domestic credit institutions], there are necessarily other areas or bodies to which these funds flow (surplus areas); The funds that flow into one of them naturally always cover exactly the financing needs of the other. The development of the market climate (interest rates, other conditions, shortages) on all money, credit and capital markets, including the bank money market, can never be determined solely from the development of the amounts and the signs of any balances (deficits, surpluses; financing requirements here, amount investable funds there) can be derived or explained. Rather, the decisive factor for the financing climate, even after the occurrence of even the largest deficits, is whether and on what conditions the surplus areas are ready and able to make the funds flowing into them available again for the deficit areas. "

↑ Reuters, February 13, 2014: Risk of deflation in euro zone seen by economists as more serious than ECB says: poll : "The threat of deflation across the euro zone is more serious than the European Central Bank claims, as austerity imposed on peripheral economies is already pushing prices lower. "

^ Hans Gestrich: Credit and saving. Jena 1944. ( PDF ; 66.9 MB) p. 98:
"If the credit policy does not intervene by lowering the monetary interest and stimulating the use of credit for investments, the WICKSELL process begins downwards."

↑ Council of Experts for the Assessment of Overall Economic Development: Annual Report 2012/13: Stable Architecture for Europe - Domestic Action Needed (PDF; 4.9 MB) p. 93, point 148:
"Such a constellation can occur especially after a financial crisis, when banks are unable to lend on a large scale through deleveraging and the private sector seeks to repair its balance sheets by saving money. However, these plans can only be implemented in aggregate if the state is prepared to take the necessary counter-position as a debtor. "

^ Hans Gestrich: Credit and saving. Jena 1944. p. 100:
"The state itself has to take credit in order to finance additional expenditure and in this way pave the way that leads to the equalization of the imbalance between savings and credit."

^ Reiner Clement, Wiltrud Terlau, Manfred Kiy: Applied macroeconomics. Macroeconomics, economic policy and sustainable development with case studies. 5th edition. Munich 2013. ( online ) p. 324: "The state even contributes to deflation if it has to cut its demand sharply through austerity measures."

↑ Wolfgang Stützel: On the influence of public debt on the capital market interest rate. In: National Debt Controversy. Cologne, 1981, pp. 50–51: “In the course of every increase in government net borrowing, i. H. Increased government spending surpluses (compared with the previous period or with previously existing plans), so the revenue surplus of all other economic agents increases to exactly the same extent; for some of them this is reflected in the form of higher revenue surpluses, for others in the form of lower expenditure surpluses. "

^ Wolfgang Stützel (ed.), Wilhelm Lautenbach: Interest, credit and production. Tübingen 1952. p. 91: "Since it is now exactly the opposite, according to observation and experience, since the savings of non-entrepreneurs are still growing overall, only further illiquidization of the economy can be expected from this side."

↑ See Hans Gestrich: Credit and Saving. Jena 1944.

^ Wilhelm Lautenbach, September 16, 1931 at the secret conference in Berlin. In: Economic Policy in Crisis. The (secret) conference of the Friedrich List Society in September 1931 on the possibilities and consequences of credit expansion. (Eds. Knut Borchardt, Hans Otto Schötz) Baden-Baden 1991. p. 231 f: "Today you have the fact that all German companies have almost stopped all replacement needs."

↑ Deutsche Bundesbank, December 19, 2013: No deflation in sight : “While companies are now selling less and at lower prices, the costs of wages and salaries remain stable for the time being because they are contractually agreed. This leads to a decline in corporate profits. The companies are further reducing their production, new investments are being dispensed with and employees are being laid off. Some companies even have to file for bankruptcy. Finally, wages and salaries will be adjusted to the new conditions and reduced. Falling incomes and rising unemployment are causing demand from private households to fall even further. The economy is losing more and more of its strength, which can result in a self-reinforcing downturn. "

↑ Expert council for the assessment of macroeconomic development: Annual report 1967/68. ( PDF ; 5.6 MB) p. 98, item 191:
“The same applies to companies. The financing difficulties of 1966 caused them to postpone investment projects and to reduce stocks, but in 1967 an abundant supply of money alone could not induce them to invest more. In 1966 financial considerations were decisive, so in 1967 sales and profit prospects. And where financing considerations were still in the foreground, as was the case with entrepreneurs, for whom the recession drastically demonstrated the risks of high debt, the abundant supply of loan money often did not act as an incentive for additional capital investments, but rather as a welcome opportunity to consolidate existing debt . "

^ Carl Föhl: Money creation and the economic cycle . Munich and Leipzig 1937. p. 329: “Even though in times of upturn the bank overdrafts may serve to pre-finance investments in the hope of later long-term financing, this path will not be able to be followed when it is stalled . The cautious entrepreneurs will be cautious on their own, and the less cautious or those already in distress will find the banks extremely reluctant. "

↑ Wilhelm Lautenbach (Ed. Wolfgang Stützel): Interest, credit and production (PDF; 1.2 MB), Tübingen 1952, p. 49: “The entrepreneur's need for credit arises from the fact that non-entrepreneurs save, regardless of whether Are private or whether it is the public sector that has surpluses. "

^ Hans Gestrich: Credit and saving. Jena 1944. p. 74: “The restriction of bank credit forces industrial and commercial bank customers to restrict their orders and to rigorously collect their claims. As a result, the sale of goods is made more difficult and prices are depressed further. Other debtors freeze and this gives rise to further credit restrictions. "

^ Hans Gestrich: Credit and saving. Jena 1944. p. 6: “The tendency of the potential borrower to take out a loan at a certain interest rate depends on the earnings prospects of the planned investment, i.e. on the question of whether this return is slightly higher or at least as high as the required interest rate . "

↑ Wolfgang Stützel: Economic balance mechanics. (Reprint of the 2nd edition) Tübingen 2011. ( online ) p. 166: “Even if certain interest-sensitive private investments should initially rise under the impression of credit reduction, the income surpluses of the non-entrepreneurs and thus the expenditure surpluses of the entrepreneurs through fiscal and austerity policies can still do so be increased, so that entrepreneurial profits fall , the advantage of the interest rate cut is overcompensated and the total investment is slowed down permanently; because it is a fact of experience that investments are more strongly influenced by changes in the (gross) profit prospects than by changes in the interest rate. "

^ Reiner Clement, Wiltrud Terlau, Manfred Kiy: Applied macroeconomics. Macroeconomics, economic policy and sustainable development with case studies. 5th edition. Munich 2013. ( online ) p. 324: "The unemployed cannot expect much support from the state, since its income falls and its expenditure increases in the case of higher unemployment."

^ Wilhelm Lautenbach: Credit shrinkage and credit expansion. In: Wirtschaftskurve 1937. ( PDF ; 98.4 KB) p. 12 f:
“Since, however, according to observation and experience, it is exactly the other way round, since the savings of non-entrepreneurs are still growing overall, there is only one other side from this side Expect illiquidization of the economy. Yes, in addition, the growth in the savings of non-entrepreneurs in the Depression is the reason and expression of capital losses in companies. "

^ Wilhelm Lautenbach: Possibilities of an economic recovery through investment and credit expansion. September 9, 1931. In: Interest, Credit and Production. (Ed. Wolfgang Stützel) Tübingen 1952. p. 142, right column: “Because at the moment we have the paradoxical situation that, despite extraordinarily reduced production, demand is constantly falling short of supply, and therefore the tendency towards ever more extensive production cutbacks. So we always have production surpluses that we don't know what to do with. "

^ Wolfgang Stützel (ed.) Wilhelm Lautenbach: Interest, credit and production. Tübingen 1952. ( PDF ( Memento of October 17, 2013 in the Internet Archive )) p. 76: "And the worst of all is the case that we experienced in 1929, namely that all the large industrialized countries experienced an economic upheaval 'at the same time'."

↑ Cf. Hans Gestrich: Neue Kreditpolitik (PDF), Stuttgart and Berlin 1936, p. 40: “If there is a strong frozen indebtedness of the economic enterprises, the newly created giro funds are initially used by the recipients in the first period of a credit expansion to reduce theirs Debt used. "

↑ See Heinrich Rittershausen: Bankpolitik. An examination of the border area between credit theory, price theory and economic policy. Frankfurt 1956. p. 32:
“Conversely, the repayment of a bank debt means the sterilization of credit. Here, too, is one of the cases on which the banks and state economic policy can exert very little influence: the stagnation of the 1930s in Germany and other countries was particularly characterized by the attempts by banks and government agencies to Extending credit failed for years because of the tendency of customers to repay existing debts. Time and again, the deflationary effects of repayments resulted in compensation and thus the destruction of those active effects that had been initiated. "

↑ See Richard Koo: The Age of Balance Sheet Recessions. What Post-2008 US, Europe and China Can Learn from Japan 1990-2005. (PDF; 304 KB), especially graphs from p. 13.

[1] Hans Gestrich: New credit policy. Stuttgart and Berlin 1936. ( PDF ) p. 56:
“That one can influence the price level by increasing or authorizing the rate at which the central bank discounts bills is a wisdom that is more than a hundred years old. Traditional credit policy looked at this effect from the point of view of currency protection. By lowering the price level by increasing the discount, one acts on the balance of payments in the sense of an activation, "improves" the exchange rate and - if the international gold currency system prevails - attracts money from abroad. Recognition of this connection has long made discount policy the classic instrument of central bank policy . It has long been evident that the setting of the discount from the point of view of "protecting the currency" is often not in line with internal economic needs. "

[2] Alan Greenspan: My Life for Business. Frankfurt 2007. ( online ) p. 263: "I could never have imagined how deflation would come about under a fiat currency."

[3] Alan Greenspan: My Life for Business. Frankfurt 2007. p. 271. ( online )

[4] Jens Weidmann on the subject of deflation: Video ( Memento of the original from August 21, 2014 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. from the event "Weidmann meets teachers" @1@ 2

[5] Wilhelm Lautenbach: About credit and production. Frankfurt 1937. p. 18:
How does the credit system work when the state finances large expenditures through credit? Where do the funds come from?
“Most of the people who ask the question, and it is by no means just lay people, think that there is some limited supply of money or credit. This notion is usually linked to the worried question whether the state might not tighten credit for the economy through its credit claims. In truth, however, it is exactly the opposite. When the state takes credit on a large scale, the entire credit economy is loosened up. The money and credit markets are becoming liquid, entrepreneurs are becoming liquid, their bank loans are decreasing, business deposits are increasing [...]. "

[6] Advisory Council on the Assessment of Overall Economic Development: Annual Report 1966/67: Expansion and Stability (PDF; 7.2 MB) p. 87, item 154:
"If funds flow out of any areas, and this applies to all credit and capital markets ( Deficit areas), so that there is a need for financing here [for example in the case of domestic credit institutions], there are necessarily other areas or bodies to which these funds flow (surplus areas); The funds that flow into one of them naturally always cover exactly the financing needs of the other. The development of the market climate (interest rates, other conditions, shortages) on all money, credit and capital markets, including the bank money market, can never be determined solely from the development of the amounts and the signs of any balances (deficits, surpluses; financing requirements here, amount investable funds there) can be derived or explained. Rather, the decisive factor for the financing climate, even after the occurrence of even the largest deficits, is whether and on what conditions the surplus areas are ready and able to make the funds flowing into them available again for the deficit areas. "

[7] Reuters, February 13, 2014: Risk of deflation in euro zone seen by economists as more serious than ECB says: poll : "The threat of deflation across the euro zone is more serious than the European Central Bank claims, as austerity imposed on peripheral economies is already pushing prices lower. "

[8] Hans Gestrich: Credit and saving. Jena 1944. ( PDF ; 66.9 MB) p. 98:
"If the credit policy does not intervene by lowering the monetary interest and stimulating the use of credit for investments, the WICKSELL process begins downwards."

[9] Council of Experts for the Assessment of Overall Economic Development: Annual Report 2012/13: Stable Architecture for Europe - Domestic Action Needed (PDF; 4.9 MB) p. 93, point 148:
"Such a constellation can occur especially after a financial crisis, when banks are unable to lend on a large scale through deleveraging and the private sector seeks to repair its balance sheets by saving money. However, these plans can only be implemented in aggregate if the state is prepared to take the necessary counter-position as a debtor. "

[10] Hans Gestrich: Credit and saving. Jena 1944. p. 100:
"The state itself has to take credit in order to finance additional expenditure and in this way pave the way that leads to the equalization of the imbalance between savings and credit."

[11] Reiner Clement, Wiltrud Terlau, Manfred Kiy: Applied macroeconomics. Macroeconomics, economic policy and sustainable development with case studies. 5th edition. Munich 2013. ( online ) p. 324: "The state even contributes to deflation if it has to cut its demand sharply through austerity measures."

[12] Wolfgang Stützel: On the influence of public debt on the capital market interest rate. In: National Debt Controversy. Cologne, 1981, pp. 50–51: “In the course of every increase in government net borrowing, i. H. Increased government spending surpluses (compared with the previous period or with previously existing plans), so the revenue surplus of all other economic agents increases to exactly the same extent; for some of them this is reflected in the form of higher revenue surpluses, for others in the form of lower expenditure surpluses. "

[13] Wolfgang Stützel (ed.), Wilhelm Lautenbach: Interest, credit and production. Tübingen 1952. p. 91: "Since it is now exactly the opposite, according to observation and experience, since the savings of non-entrepreneurs are still growing overall, only further illiquidization of the economy can be expected from this side."

[14] See Hans Gestrich: Credit and Saving. Jena 1944.

[15] Wilhelm Lautenbach, September 16, 1931 at the secret conference in Berlin. In: Economic Policy in Crisis. The (secret) conference of the Friedrich List Society in September 1931 on the possibilities and consequences of credit expansion. (Eds. Knut Borchardt, Hans Otto Schötz) Baden-Baden 1991. p. 231 f: "Today you have the fact that all German companies have almost stopped all replacement needs."

[16] Deutsche Bundesbank, December 19, 2013: No deflation in sight : “While companies are now selling less and at lower prices, the costs of wages and salaries remain stable for the time being because they are contractually agreed. This leads to a decline in corporate profits. The companies are further reducing their production, new investments are being dispensed with and employees are being laid off. Some companies even have to file for bankruptcy. Finally, wages and salaries will be adjusted to the new conditions and reduced. Falling incomes and rising unemployment are causing demand from private households to fall even further. The economy is losing more and more of its strength, which can result in a self-reinforcing downturn. "

[17] Expert council for the assessment of macroeconomic development: Annual report 1967/68. ( PDF ; 5.6 MB) p. 98, item 191:
“The same applies to companies. The financing difficulties of 1966 caused them to postpone investment projects and to reduce stocks, but in 1967 an abundant supply of money alone could not induce them to invest more. In 1966 financial considerations were decisive, so in 1967 sales and profit prospects. And where financing considerations were still in the foreground, as was the case with entrepreneurs, for whom the recession drastically demonstrated the risks of high debt, the abundant supply of loan money often did not act as an incentive for additional capital investments, but rather as a welcome opportunity to consolidate existing debt . "

[18] Carl Föhl: Money creation and the economic cycle . Munich and Leipzig 1937. p. 329: “Even though in times of upturn the bank overdrafts may serve to pre-finance investments in the hope of later long-term financing, this path will not be able to be followed when it is stalled . The cautious entrepreneurs will be cautious on their own, and the less cautious or those already in distress will find the banks extremely reluctant. "

[19] Wilhelm Lautenbach (Ed. Wolfgang Stützel): Interest, credit and production (PDF; 1.2 MB), Tübingen 1952, p. 49: “The entrepreneur's need for credit arises from the fact that non-entrepreneurs save, regardless of whether Are private or whether it is the public sector that has surpluses. "

[20] Hans Gestrich: Credit and saving. Jena 1944. p. 74: “The restriction of bank credit forces industrial and commercial bank customers to restrict their orders and to rigorously collect their claims. As a result, the sale of goods is made more difficult and prices are depressed further. Other debtors freeze and this gives rise to further credit restrictions. "

[21] Hans Gestrich: Credit and saving. Jena 1944. p. 6: “The tendency of the potential borrower to take out a loan at a certain interest rate depends on the earnings prospects of the planned investment, i.e. on the question of whether this return is slightly higher or at least as high as the required interest rate . "

[22] Wolfgang Stützel: Economic balance mechanics. (Reprint of the 2nd edition) Tübingen 2011. ( online ) p. 166: “Even if certain interest-sensitive private investments should initially rise under the impression of credit reduction, the income surpluses of the non-entrepreneurs and thus the expenditure surpluses of the entrepreneurs through fiscal and austerity policies can still do so be increased, so that entrepreneurial profits fall , the advantage of the interest rate cut is overcompensated and the total investment is slowed down permanently; because it is a fact of experience that investments are more strongly influenced by changes in the (gross) profit prospects than by changes in the interest rate. "

[23] Reiner Clement, Wiltrud Terlau, Manfred Kiy: Applied macroeconomics. Macroeconomics, economic policy and sustainable development with case studies. 5th edition. Munich 2013. ( online ) p. 324: "The unemployed cannot expect much support from the state, since its income falls and its expenditure increases in the case of higher unemployment."

[24] Wilhelm Lautenbach: Credit shrinkage and credit expansion. In: Wirtschaftskurve 1937. ( PDF ; 98.4 KB) p. 12 f:
“Since, however, according to observation and experience, it is exactly the other way round, since the savings of non-entrepreneurs are still growing overall, there is only one other side from this side Expect illiquidization of the economy. Yes, in addition, the growth in the savings of non-entrepreneurs in the Depression is the reason and expression of capital losses in companies. "

[25] Wilhelm Lautenbach: Possibilities of an economic recovery through investment and credit expansion. September 9, 1931. In: Interest, Credit and Production. (Ed. Wolfgang Stützel) Tübingen 1952. p. 142, right column: “Because at the moment we have the paradoxical situation that, despite extraordinarily reduced production, demand is constantly falling short of supply, and therefore the tendency towards ever more extensive production cutbacks. So we always have production surpluses that we don't know what to do with. "

[26] Wolfgang Stützel (ed.) Wilhelm Lautenbach: Interest, credit and production. Tübingen 1952. ( PDF ( Memento of October 17, 2013 in the Internet Archive )) p. 76: "And the worst of all is the case that we experienced in 1929, namely that all the large industrialized countries experienced an economic upheaval 'at the same time'."

[27] Cf. Hans Gestrich: Neue Kreditpolitik (PDF), Stuttgart and Berlin 1936, p. 40: “If there is a strong frozen indebtedness of the economic enterprises, the newly created giro funds are initially used by the recipients in the first period of a credit expansion to reduce theirs Debt used. "

[28] See Heinrich Rittershausen: Bankpolitik. An examination of the border area between credit theory, price theory and economic policy. Frankfurt 1956. p. 32:
“Conversely, the repayment of a bank debt means the sterilization of credit. Here, too, is one of the cases on which the banks and state economic policy can exert very little influence: the stagnation of the 1930s in Germany and other countries was particularly characterized by the attempts by banks and government agencies to Extending credit failed for years because of the tendency of customers to repay existing debts. Time and again, the deflationary effects of repayments resulted in compensation and thus the destruction of those active effects that had been initiated. "

[29] See Richard Koo: The Age of Balance Sheet Recessions. What Post-2008 US, Europe and China Can Learn from Japan 1990-2005. (PDF; 304 KB), especially graphs from p. 13.