A dangerous thing concerning debt is what Irving Fisher (1933) called ”debt deflation.” It is usually described as deflation causing the real value of nominal debt to increase. Loan-to-value and loan-to-income ratios also increase, since the debt is fixed in nominal terms but the nominal value of assets and income fall.
‘Leaning against the wind’, debt deflation, and the Riksbank
Lars E.O. Svensson, 10 October 2013
Monetary policy and excessive bank risk taking
Itai Agur, Maria Demertzis, 13 January 2011
Disclaimer: The views expressed in this article are those of the authors only, and do not reflect the views of De Nederlandsche Bank or of its Board.
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