Irving Fisher's Debt Deflation Theory

naked capitalism: Irving Fisher's Debt Deflation Theory and Its Relevance Today:

I'm sure readers have noticed that talking about the global economic downturn as a depression is suddenly respectable. A mere three months, use of that term would have gotten one branded as a alarmist (even Nouriel Roubini, who has a taste for drama, often used the code of 'L shaped recession').

As a result, economists and commentators are re-examining the Great Depression, particularly since some doubt that the officialdom has drawn the correct lessons from it.

One respected economist from that era whose work is often praised but seldom followed is Irving Fisher. In a VoxEU article, Enrique Mendoza argues in favor of Fisher's debt deflation theory, and explains its policy implications. Fisher is appealing because he sees the unwinding of excessive leverage as the driving force of a depression, while most other theories see it as an outcome.

From VoxEU