Building on both the monetary hypothesis of Milton Friedman and Anna Schwartz as well as the debt deflation hypothesis of Irving Fisher, Ben Bernanke developed an alternative way in which the financial crisis affected output. He builds on Fisher's argument that dramatic declines in the price level and nominal incomes lead to increasing real debt burdens which in turn leads to debtor insolvency and consequently leads to lowered aggregate demand , a further decline in the price level then results in a debt deflationary spiral. According to Bernanke, a small decline in the price level simply reallocates wealth from debtors to creditors without doing damage to the economy. But when the deflation is severe falling asset prices along with debtor bankruptcies lead to a decline in the nominal value of assets on bank balance sheets. Banks will react by tightening their credit conditions, that in turn leads to a credit crunch which does serious harm to the economy. A credit crunch lowers investment and consumption and results in declining aggregate demand which additionally contributes to the deflationary spiral.   
Legislators, therefore, ought not to trust the future government of a state entirely to chance, but ought to provide a system of laws to regulate the administration of public affairs to the latest posterity. Effects will always correspond to causes; and wise regulations in any commonwealth are the most valuable legacy that can be left to future ages. In the smallest court or office, the stated forms and methods, by which business must be conducted, are found to be a considerable check on the natural depravity of mankind. Why should not the case be the same in public affairs? Can we ascribe the stability and wisdom of the Venetian government, through so many ages, to any thing but the form of government? And is it not easy to point out those defects in the original constitution, which produced the tumultuous governments of Athens and Rome , and ended at last in the ruin of these two famous republics? And so little dependance has this affair on the humours and education of particular men, that one part of the same republic may be wisely conducted, and another weakly, by the very same men, merely on account of the difference of the forms and institutions, by which these parts are regulated. Historians inform us that this was actually the case with Genoa . For while the state was always full of sedition, and tumult, and disorder, the bank of St. George , which had become a considerable part of the people, was conducted, for several ages, with the utmost integrity and wisdom 0 originally '*'; footnotes have been numbered for ease of reference 7 * .
While the "literary battle" against Peng raged, Mao fired Yang Shangkun —director of the Party's General Office, an organ that controlled internal communications—on a series of unsubstantiated charges, installing in his stead staunch loyalist Wang Dongxing , head of Mao's security detail.  Yang's dismissal likely emboldened Mao's allies to move against their factional rivals.  In December, Defence Minister and Mao loyalist Lin Biao accused General Luo Ruiqing , the chief of staff of the People's Liberation Army (PLA), of being anti-Mao, alleging that Luo put too much emphasis on military training rather than Maoist "political discussion". Despite initial skepticism in the Politburo of Luo's guilt, Mao pushed for an 'investigation', after which Luo was denounced, dismissed, and forced to deliver a self-criticism . Stress from the events led Luo to attempt suicide.  Luo's removal secured the military command's loyalty to Mao.