[api]

The trouble is when nominal value shrinks, it shackles people to endless cycles of debt slavery. Either that or people default, which causes follow-on cascades of defaults.

If we had a low-debt cash-only economy this might not be the case, but our economy is so far from that it's not even worth talking about. We are absolutely a credit economy, and when the numbers get smaller in a credit economy pretty much everything breaks.

Eventually the collapse of the middle class will drag down everything else, including the rich.

[Amezarak]

FWIW, the US is actually doing a great job of deleveraging its private debt, especially relative to other countries.

http://www.mckinsey.com/insights/global_capital_markets/unev...

[api]

As with most things, it could be worse. But the overall picture -- especially of wages vs. asset prices -- is not exactly good.