#303 – Steve Keen: Marxism, Capitalism, and Economics
Lex Fridman Podcast
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Beware the Perils of Debt Deflation
Debt deflation poses greater risks to capitalism than inflation, as it exacerbates the burden of existing debts. This occurs when deflation leads individuals and businesses to liquidate assets to pay off debts, resulting in falling prices and an effective increase in the debt burden relative to the reduced price level. The historical context of the Great Depression and the 2007 financial crisis highlights the dangers, particularly when excessive lending and private money creation inflate debt levels. Building government surpluses, as demonstrated in the 1920s under Calvin Coolidge, can help maintain economic stability by countering these adverse effects.
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