Irving Fisher on the causes of over-indebtedness

44. The over-indebtedness hitherto presupposed must have had its starters. It may be started by many causes, of which the most common appears to be new opportunities to invest at a big prospective profit, as compared with ordinary profits and interest, such as through new inventions, new industries, development of new resources, opening of new lands or new markets. Easy money is the great cause of overborrowing. When an investor thinks he can make over 100 per cent per annum by borrowing at 6 per cent, he will be tempted to borrow, and to invest or speculate with borrowed money. This was a prime cause leading to the over-indebtedness of 1929. Inventions and technological improvements created wonderful investment opportunities, and so caused big debts. Other causes were the left-over war debts, domestic and foreign, public and private, the reconstruction loans to foreigners, and the low interest policy adopted to help England get back on the gold standard in 1925.

~ Irving Fisher, "The Debt-Deflation Theory of Great Depressions," September 1933