Every government, from the Obama administration right through to Angela Merkel, the Eurozone and the IMF, promise to save the banks, not the economy.

Deflation is a leakage from this circular flow, to pay banks and the real estate, called the FIRE sector - finance, insurance and real estate. These transfer payments leave less and less of the paycheck to be spent on goods and services, so markets shrink.

Debtor countries may postpone the inevitable by borrowing from the IMF or U.S. Treasury to buy out bondholders. This saves the latter from taking a loss - leaving the debtor country with debts that are even harder to annul, because they are to foreign governments and international institutions.

Nobody prefers to earn income any more, because that's taxable. Rich people prefer to make capital gains.

Mathematically, debts grow exponentially at compound interest. Banks recycle the interest into new loans, so debts grow exponentially, faster than the economy can afford to pay.

Debt deflation is when there's less money that people have to spend out of their paychecks on goods and services, because they're paying the FIRE sector. Oil going down is a function of the supply and demand of oil in the market. It's a separate phenomenon.

The financial time frame always has been short-term. Projects with long-term paybacks are cut back, because CEOs and financial managers simply want to take their money and run. That is the financial mentality.