Introduction: everything old is new again -- When personal debt was really business debt (2000 BC-1920 AD) -- Everybody paid cash for the Model T (1908-1929) -- Fannie Mae can save America (1924-1939) -- How I learned to stop worrying and love the debt (1945-1960) -- Discounted goods and...

We show that the size of collateralized household debt determines an economy's vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt...