How the Economic Machine Works - Part 4

deleveraging. In a deleveraging, people cut spending, incomes fall, credit disappears, asset prices drop, banks get squeezed, the stock market crashes, social tensions rise, and the whole thing starts to feed on itself the other way. As incomes fall and debt repayments rise, borrowers get squeezed.no longer creditw worthy, credit dries up and borrowers can no longer borrow enough money to make their debt repayments. Scrambling to fill this hole, borrowers are forced to sell assets. The rush to sell assets f ...