$SPY If one doesn’t have much more in assets than one has in liabilities and one’s income falls beneath the amount one needs to pay out to cover the total of one’s operating expenses and one’s debt-service expenses, one will have to cut one’s expenses or will default/restructure one’s debts. Since one person’s spending is another person’s income, that cutting of expenses will hurt not just the entity that is having to cut those expenses but it will hurt the ones who depend on that spending to earn income. Similarly, since one’s debts are another’s assets, that defaulting on debts reduces other entities’ assets, which requires them to cut their spending. This dynamic produces a self-reinforcing downward debt and economic contraction that becomes a political issue as people argue over how to divide the shrunken pie.