Incomes fall, and debt service costs rise. This leads to a "beautiful" or "ugly" deleveraging depending on how policymakers respond. 2. The Four Levers for Deleveraging

Reducing the debt burden by forcing lenders to take losses.

Cutting spending (often painful and deflationary).

Debt grows rapidly, but it is used for productive purposes that generate enough income to service the debt.

Governments and central banks typically use four tools to manage a debt crisis and "navigate" toward recovery: