How the Market-Based System Works

As mentioned, the previously outlined economic players buy and sell both 1) goods and services and 2) financial assets, and they can pay for them with either 1) money or 2) credit. In a market-based system, this exchange takes place through free choice – i.e., there are “free markets” in which buyers and sellers of goods, services and financial assets make their transactions in pursuit of their own interests. The production and purchases of financial assets (i.e., lending and investing) is called “capital formation”. It occurs because both the buyer and seller of these financial assets believe that the transaction is good for them. Those with money and credit provide it to recipients in exchange for the recipients’ “promises” to pay them more. So, for this process to work well, there must be large numbers of capable providers of capital (i.e., investors/lenders) who choose to give money and credit to large numbers of capable recipients of capital (borrowers and sellers of equity) in exchange for the recipients’ believable claims that they will return amounts of money and credit that are worth more than they were given. While the amount of money in existence is controlled by central banks, the amount of credit in existence can be created out of thin air – i.e., any two willing parties can agree to do a transaction on credit – though this is influenced by central bank policies. In bubbles more credit is created than can be later paid back, which creates busts.

如前所述，以前概述的经济参与者购买和出售1）货物和服务，以及2）金融资产，他们可以用1）金钱或2）信贷支付他们。在一个以市场为基础的制度下，这种交换是通过自由选择进行的 - 即有“自由市场”，商品，服务和金融资产的买卖双方交易追求自己的利益。金融资产（即贷款和投资）的生产和采购称为“资本形成”。这是因为这些金融资产的买方和卖方都认为交易对他们有利。那些有钱和信贷的人把它提供给接受者，以换取收受者的“承诺”来支付更多的钱。因此，为了使这一进程顺利运转，必须有大量有能力的资本提供者（即投资者/贷方）选择向大量有能力的资本接受者（借款人和卖方）交换资金和信贷对于收件人的可信任的声称，他们将返回的金额和信用额度比他们给予的更多。虽然存在的金额由中央银行控制，但存在的信贷额度可以从薄薄的空间中创造出来 - 即任何两个愿意的方可以同意进行信贷交易，尽管这受到央行政策的影响。在泡沫更多的信用创造比后来可以偿还，这创造了胸围。

When capital contractions occur, economic contractions also occur, i.e., there is not enough money and/or credit spent on goods, services and financial assets. These contractions typically occur for two reasons, which are most commonly known as recessions (which are contractions within a short-term debt cycle) and depressions (which are contractions within deleveragings). Recessions are typically well understood because they happen often and most of us have experienced them, whereas depressions and deleveragings are typically poorly understood because they happen infrequently and are not widely experienced.

当出现资本收缩时，也会出现经济收缩，即货币，服务和金融资产没有足够的资金和/或信贷。这些收缩通常出现两个原因，这些原因最常被称为衰退（即短期债务周期内的收缩）和萧条（这是在去杠杆化期间的收缩）。经济衰退通常被很好地理解，因为它们经常发生，我们大多数人经历过它们，而凹陷和去杠杆化通常很少被理解，因为它们很少发生并且没有广泛的经历。

A short-term debt cycle, (which is commonly called the business cycle), arises from a) the rate of growth in spending (i.e., total $ funded by the rates of growth in money and credit) being faster than the rate of growth in the capacity to produce (i.e., total Q) leading to price (P) increases until b) the rate of growth in spending is curtailed by tight money and credit, at which time a recession occurs. In other words, a recession is an economic contraction that is due to a contraction in private sector debt growth arising from tight central bank policy (usually to fight inflation), which ends when the central bank eases. Recessions end when central banks lower interest rates to stimulate demand for goods and services and the credit growth that finances these purchases, because lower interest rates 1) reduce debt service costs; 2) lower monthly payments (de-facto, the costs) of items bought on credit, which stimulates the demand for them; and 3) raise the prices of income-producing assets like stocks, bonds and real estate through the present value effect of discounting their expected cash flows at the lower interest rates, producing a “wealth effect” on spending.

短期债务周期（通常称为商业周期）来自a）支出增长率（即由资金和信贷增长率提供的总额）比增长率快生产能力（即总Q）导致价格（P）增加，直到b）由于货币和信贷紧缩，支出增长率被削减，此时经济衰退。换句话说，经济衰退是经济紧缩，这是由于中央银行政策紧张（通常是打击通货膨胀）而导致的私人部门债务增长收缩，中央银行的放缓结束。中央银行降低利率以刺激货物和服务需求以及资助这些采购的信贷增长导致经济衰退，因为利率较低1）降低偿债成本; 2）降低信贷项目的月度付款（事实上，成本），刺激他们的需求; 3）通过以较低的利率贴现预期现金流量的现值，提高股票，债券和房地产等收入产生的资产价格，对支出产生“财富效应”。

A long-term debt cycle, arises from debts rising faster than both incomes and money until this can’t continue because debt service costs become excessive, typically because interest rates can’t be reduced any more. A deleveraging is the process of reducing debt burdens (i.e., debt and debt service relative to incomes). Deleveragings typically end via a mix of 1) debt reduction,3 2) austerity, 3) redistributions of wealth, and 4) debt monetization. A depression is the economic contraction phase of a deleveraging. It occurs because the contraction in private sector debt cannot be rectified by the central bank lowering the cost of money. In depressions, a) a large number of debtors have obligations to deliver more money than they have to meet their obligations, and b) monetary policy is ineffective in reducing debt service costs and stimulating credit growth.

长期的债务周期来自于收入和金钱上升的债务上升速度，直到不能继续，因为偿还债务费用过高，这通常是因为利率不能再减少。去杠杆化是减轻债务负担（即债务和偿债相对于收入的债务）的过程。通常会通过1）债务减免，3 2）紧缩措施，3）财富再分配，以及4）债务货币化来结合。抑郁症是去杠杆化的经济收缩阶段。这是因为中央银行降低资金成本不能纠正私营部门债务收缩。在萧条中，a）大量债务人有义务提供更多的资金，而不是履行义务; b）货币政策在降低偿债成本和刺激信贷增长方面无效。

Typically, monetary policy is ineffective in stimulating credit growth either because interest rates can’t be lowered (because interest rates are near 0%) to the point of favorably influencing the economics of spending and capital formation (this produces deflationary deleveragings), or because money growth goes into the purchase of inflation-hedge assets rather than into credit growth, which produces inflationary deleveragings. Depressions are typically ended by central banks printing money to monetize debt in amounts that offset the deflationary depression effects of debt reductions and austerity.

通常情况下，货币政策在刺激信贷增长方面无效，因为利率不能降低（因为利率接近0％），才能有利地影响支出和资本形成的经济性（这导致通货紧缩的杠杆化），或因为 货币增长进入购买通货膨胀对冲资产而不是信贷增长，这产生了通货膨胀的去杠杆化。抑郁症通常由中央银行打印货币，以抵消债务减免和紧缩的通货紧缩抑郁症影响的债务货币化结束。

To be clear, while depressions are the contraction phase of a deleveraging, deleveragings (e.g., reducing debt burdens) can occur without depressions if they are well managed. (See ”An In-Depth Look at Deleveragings.“)

要清楚的是，虽然萧条是去杠杆化的收缩阶段，但是如果管理良好，则可以在没有萧条的情况下发生去杠杆化（例如减轻债务负担）。（见“深入了解切换”）

Differences in how governments behave in recessions and deleveragings are good clues that signal which one is happening. For example, in deleveragings, central banks typically ”print“ money that they use to buy large quantities of financial assets in order to compensate for the decline in private sector credit, while these actions are unheard of in recessions.4 Also, in deleveragings, central governments typically spend much, much more to make up for the fall in private sector spending.

政府在经济衰退和去杠杆化方面的行为差异是指示哪一个正在发生的良好线索。例如，在去杠杆化中，中央银行通常会“打印”用于购买大量金融资产的资金，以补偿私人部门信贷的下降，而这些行动在经济衰退中是闻所未闻的而且，在去杠杆化中，中央政府通常花费更多的钱来弥补私营部门的支出下降。

But let‘s not get ahead of ourselves. Since these two types of contractions are just parts of two different types of cycles that are explained more completely in this Template, let’s look at the Template.

但是让我们不要超前于自己。由于这两种类型的收缩只是两个不同类型的周期的一部分，在本模板中更全面地解释，我们来看看模板。