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I get the "leveraged up the wazoo" part, it's unpleasant when someone defaults on debt that you hold. To match 2008 however, the pile of debt ought to be large enough and the risk has to be mispriced. (Those who hold junk bonds expect defaults and so hold a large bunch of such bonds hoping that only some will be defaulted on, and they also hold other assets. That plus the high yield of the bond before it defaulted should make things smoother.)

The deflationary spiral bit I do not get. By itself, a cheaper resource should increase consumption because now everything is cheaper and you have as much money you can spend on stuff as you used to. Externalities aside, this kind of deflation is not what's called a "deflationary spiral", is it? A deflationary spiral is when consumption goes down because people don't have money to buy stuff, and then producers lower prices, profits fall, people are fired, consumption drops further, prices fall even lower, etc. But cheap resource availability is different, theoretically, because then consumption should rise instead of drop, not? (Also it'd be a bit strange if say finding large new deposits of some resource were a guaranteed economic disaster; one would think it should make things better.)




It can be spiral-like locally without it necessarily being so nationally or globally. Ask your average roughneck or metal bender in Texas or North Dakota about layoffs, salary cuts or personal spending trends and you'll find all of the spiral characteristics.


Yes, this is not obviously deflationary. Especially when it's a resource that contributes to market inefficiency, like transportation costs. If it becomes cheaper to move things from A to B, then price differentials between A and B become harder to sustain. (that can contribute both to price falls as well as price increases - if it costs less to export something to a foreign market, domestic consumers might have to pay suppliers MORE to persuade them to sell the item locally rather than ship it overseas).




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