The fact that fiscal policy is the only instrument that can keep private sector deleveraging from running into a 1930s style depression we know from Richard Koo, of course, with ample experience in Japan
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Much of economics is highly abstract, abstruse and frankly irrelevant for explaining real world events. Couched in complex mathematics and based on very unrealistic assumptions (rational agents, instantly clearing markets, etc.), these economic models have more to do with furthering academic careers than explaining the real world. They create parallel universes that bear little resemblance to what's going on today.
A big exception is the work of Richard Koo from Nomura. He set out to explain what happened in Japan after a speculative bubble burst in 1990 that involved several asset classes (stocks, real estate, land) and was three times the size of the bubble that burst in the U.S. in 2008 (or even the one that burst in 1929).
In explaining what happened, Koo developed the concept of a 'balance sheet recession.' This is a situation following the bursting of a credit infused asset bubble, where balance sheets are badly damaged as debt stays but the assets, which underpin them (or serve as collateral) are greatly diminished in value.
In Japan, it was mostly the corporate and financial sectors that had badly damaged balance sheets after the bursting of the bubble. In the U.S. in 2008 it was largely the household sector (and, as we noted, the bursting of the bubble was a much smaller event).
When the private sector balance sheets are damaged and they are trying to repair it has certain noteworthy effects on the economy. [Read on here]