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Following the stock market crash of 1929 and the ensuing Great Depression, Fisher developed a theory of economic crises called "debt-deflation", which rejected general equilibrium theory and attributed crises to the bursting of a credit bubble. According to the debt deflation theory, a sequence of effects of the debt bubble bursting occurs: 1. Debt liquidation and distress selling. 2. Contraction of the money supply as bank loans are paid off. 3. A fall in the level of asset prices. 4. A still greater fall in the net worth of businesses, precipitating bankruptcies. 5. A fall in profits. 6. A reduction in output, in trade and in employment. 7. Pessimism and loss of confidence. 8. Hoarding of money. 9. A fall in nominal interest rates and a rise in deflation adjusted interest rates. This theory was ignored in favor of Keynesian economics, partly due to the damage to Fisher's reputation from his overly optimistic attitude prior to the crash, but has experienced a revival of mainstream interest since the 1980s, particularly since the Late-2000s recession, and is now a main theory with which he is popularly associated.

"CYCLE THEORY" IN GENERAL
1. The economic system contains innumerable variables—quantities of "goods (physical wealth, property rights, and services), the prices of these goods, and their values (the quantities multiplied by the prices). Changes in any or all of this vast array of variables may be due to many causes. Only in imagination can all of these variables remain constant and be kept in equilibrium by the balanced forces of human desires, as manifested through "supply and demand."
2. Economic theory includes a study both of (a) such imaginary, ideal equilibrium—which may be stable or unstable—and (b) disequilibrium. The former is economic statics; the latter, economic dynamics. So-called cycle theory is merely one part of the study of economic dis-equilibrium.
3. The study of dis-equilibrium may proceed in either of two ways. We may take as our unit for study an actual historical case of great dis-equilibrium, such as, say, the panic of 1873; or we may take as our unit for study any constituent tendency, such as, say, deflation, and discover its general laws, relations to, and combinations with, other tendencies. The former study revolves around events, or facts; the latter, around tendencies. The former is primarily economic history; the latter is primarily economic science. Both sorts of studies are proper and important. Each helps the other. The panic of 1873 can only be understood in the light of the various tendencies involved—deflation and other; and deflation can only be understood in the light of the various historical manifestations—1873 and other."

Irving Fisher

Irving Fisher (February 27, 1867 – April 29, 1947) was an American economist, inventor, and health campaigner, and one of the earliest American neoclassical economists, though his later work on debt deflation often regarded as belonging instead to the Post-Keynesian school.

Fisher made important contributions to utility theory and general equilibrium. His work on the quantity theory of money inaugurated the school of economic thought known as "monetarism." Both Milton Friedman and James Tobin called Fisher "the greatest economist the United States has ever produced." Some concepts named after Fisher include the Fisher equation, the Fisher hypothesis, the international Fisher effect, and the Fisher separation theorem.

Fisher was perhaps the first celebrity economist, but his reputation during his lifetime was irreparably harmed by his public statements, just prior to the Wall Street Crash of 1929, claiming that the stock market had reached "a permanently high plateau." His subsequent theory of debt deflation as an explanation of the Great Depression was largely ignored in favor of the work of John Maynard Keynes.His reputation has since recovered in neoclassical economics, particularly after his work was revived in the late 1950s and more widely due to an increased interest in debt deflation in the Late-2000s recession.

Fisher produced various inventions during his lifetime, the most notable of which was an "index visible filing system" which he patented in 1913 and sold to Kardex Rand (later Remington Rand) in 1925. This, and his subsequent stock investments, made him a wealthy man until his personal finances were badly hit by the Crash of 1929.