IRVING FISHER, DEBT DEFLATION, AND CRISES

Robert Shiller

Journal of the History of Economic Thought, 2013, vol. 35, issue 2, 179-183

Abstract: This article reconsiders, in the light of the current financial turmoil, Irving Fisher’s 1911 theory of financial crises and his 1933 debt-deflation theory of Great Depressions. Particular attention is given to the role of high debt ratios, high leverage ratios, and changes in the purchasing power of money in Fisher’s analysis, and to Fisher’s compensated dollar plan to stabilize the purchasing power of money. It is argued that indexing the unit of account would accomplish Fisher’s goal of stabilization without the practical difficulties of Fisher’s compensated dollar plan.

Date: 2013
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Working Paper: Irving Fisher, Debt Deflation and Crises (2011)
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