Is this your worst nightmare yet?
In the 1990s Japan experienced a so-called balance sheet recession, i.e. a recession caused and fed by a continuous need to deleverage the private sector balance sheets due to losses on the asset side. This kind of loop inevitably entrenched banks because they are the agents extending the leverage (e.g. loans) to the other entities in the economy. These kinds of recessions can be very protracted and involve large sectors of the economy and therefore, activity can be depressed for a long time. For example, Japan is still waiting today to see a sustainable pick-up in inflation, almost 30 years after the first recessionary wave.