I think i got it!

So in a deflationary environment, debt becomes nearly impossible to repay, because prices keep falling toward marginal cost.

Companies are forced to compete on price, and debt-free firms can afford to sell near marginal cost and still survive.

But companies with debt can’t keep up. they not only face lower revenues, but also have to service their debt. And if no new money is printed, interest rates tend to rise in today’s system, making it even harder to stay afloat.

That dynamic drives more and more of the economy toward insolvency.