[Moonman62]

Then the next 140 billion is gone. And probably all the leveraged garbge borrowed on top of that. But lets just use 140 billion. So then that debt is simply written off. Which means that 140 billion stays circulating in the economy.

That's $140 billion that doesn't get paid back, which leaves the banks with $140 billion less to lend. That's why bankruptcies are deflationary.

[ran20]

If the bank lent them the money and assumed all of the risk then yes. But in that case then if the bank goes bankrupt too, that money will stay circulating.

Japan did all of the things that are being suggested now, cutting rates to nothing, and massive government borrowing to jump start the economy. But they wouldn’t just accept bankruptcies and write off the bad debt.