> The problem he refers to is a classic deflationary scenario. Everybody saves money (to pay off debts, or etc). Money becomes scarcer, since nobody can borrow

> The problem he refers to is a classic deflationary scenario. Everybody saves money (to pay off debts, or etc). Money becomes scarcer, since nobody can borrow it (banks are deleveraging as well), and people aren't spending it. This is the propaganda reasoning and you bought it hook line and sinker. If everyone is saving then the banks have plenty of money to lend! That's what people do with their money, they put it in banks. The reason many banks aren't lending is that they made many bad loans and don't want to admit that they can't pay the savers back and they are now afraid to make new ones. Still, there is plenty of money to borrow from other banks. The Fed is giving money away at amazingly low interest rates.