MIchael Hudson: The Slow Crash

``MH: Most people think of it simply as prices going down. But debt deflation is what happens when people have to spend more and more of their income to carry the debts that they've run up -- to pay their mortgage debt, to pay the credit card debt, to pay student loans.... BF: So then, deflation has more to do with disposable income than it does with prices. MH: That's correct, and that's what is rarely pointed out. People tend to think that paying a debt is like going out and buying a car, buying more food or buying more clothes. But it really isn't. When you pay a debt to the bank, the banks use this money to lend out to somebody else or to yourself. The interest charges to carry this debt go up and up as debt grows.... So basically, unless you're willing to write down debts and save the economy, you're going to have deflation and a steady drain in purchasing power -- that is, shrinking markets.''