Many people point out that we are in a balance sheet recession. I agree with this view but wish to push it one step deeper. The negative wealth and income effects on debtors are positive wealth and income effects for the creditors. If the creditors were keener to invest that money in useful, productive activities the economy would be much stronger. Balance sheet recessions are most problematic when the investment channel is for some reason broken or especially weak.
You might think “Ah, the weak investment channel is due to weak AD.” And in part it is. But, if I may quote the Austrians, production takes time and recoveries do not take forever. Investors are often keen to invest into the swoosh of a future, not too far away, post-recession boom. But this desire has been much weaker than in many times past. A lot of the weakness of AD comes from the investment side, and in fact it predated the recession.