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The cycle of debt and deflation according to Irving Fisher

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  1. Introduction
  2. Nestlé, pillar of infant nutrition
  3. Birth of the Nestle Infant Nutrition range
  4. Enlargement towards an older audience and to other cultures
  5. Conclusion

Irving Fisher rightly questions why financial crises are merely an epiphenomena in the course of the business cycle. For him, finance amplifies the business cycle by adding two additional elements: over-indebtedness and deflation. Fisher defends the thesis that there is a cumulative phenomenon of sinking into crisis. An analysis of financial crises such as the 1987 Crash and the Great Depression of 1929 shows that they all originate from a non-financial debt overhang (mainly businesses), generating financial instability. Many episodes have confirmed the major role played by financial factors in setting up and amplifying business cycles.

The currency has major effects on the dynamics of key macroeconomic variables, that is to say, the volume of production, employment and the rate of profits. Monetary management is inadequate, because, by being purely passive, it would be primarily responsible for the duration and severity of a depression unleashed like the one between 1929 and 1932.

Tags: Irving Fisher, debt and inflation cycle, Great Depression, The Crash of 1987

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