In that context, “money” is just an intermediary: it facilitates efficient exchanges between producers, but does not give rise to incremental “demand” that is independent of goods and services already delivered. Accordingly, when a credit bubble bursts there is no loss of honest, production-based aggregate demand. What disappears is artificial monetary demand that was originally enabled by the central bank and the financial system, not the productive main street economy.
http://www.zerohedge.com/news/2014-07-07/krugman%E2%80%99s-bathtub-economics
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