"Economies can retreat from excessive debt burdens in three ways. One is “austerity,” where spending is restricted in the attempt to reduce deficits and keep debt burdens from growing as fast as the economy grows. The difficulty with austerity is that it is often self-defeating because economic growth slows and tax revenues often decline enough to offset the reduced spending. A second approach is “monetization,” where the central bank creates currency and bank reserves in order to purchase and effectively retire government debt. This approach may be expedient in the short-term, but can lead to severe inflationary effects in the longer-term. A final approach is “debt restructuring,” where bad debts are written down or swapped for a direct ownership
claim on some other asset (known as “debt-equity swaps”). This approach can detach the economy from the burden of prior debts, but it is most contentious politically because it requires lenders to take losses or accept changes in the structure of their claims.
In the next several years, it seems inescapable that the U.S and Europe will require a combination of all three approaches. In my view, the likelihood of addressing global debt problems without significant economic and political turbulence is quite low. The primary question is whether losses and debt restructuring will be imposed on lenders who voluntarily accepted the risks, or whether the losses will instead be inflicted on the public through austerity and inflation. My impression is that the answer will be a combination of all of these, and that the ability to navigate a broad range of potential outcomes will be required. Meanwhile, I remain skeptical that central bank interventions targeted at making investors feel “wealthier” will have much real economic effect, or will durably reduce the need for difficult economic adjustments."
I think this is the "uncertainty" that is holding back business investment more than anything. The central banks are railing against deflation and the market doesn't know whether they will suceed or fail. ( I vote fail.)