Leijonhufvud also has important things to say about the process of deleveraging. His conclusion is not rosy:
American households are also fairly highly levered at this time and virtually the only way for them to reduce debt is to increase their saving. The fall in business investment combined with the increase in attempted saving by households will, under present financial conditions, produce the kind of recession that John Maynard Keynes theorised about. The automatic adjustment tendencies of free markets are peculiarly ineffective in producing a recovery from a recession of this type.