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All deflation is bad if you owe anybody else any money at all. Mortgage, Car Note, Credit Card. If we had a stretch of deflation, the proportion of that debt (
by encoderer 17y ago
All deflation is bad if you owe anybody else any money at all. Mortgage, Car Note, Credit Card.
If we had a stretch of deflation, the proportion of that debt (which does not deflate) to your now-deflated income would push you into bankruptcy.
- bokonist 17y agoIf the economy suddenly switched from a 3% steady inflation to 3% deflation, than yeah, that would be very bad for debtors. Conversely, a sudden switch from 3% deflation to 3% inflation would be very bad for creditors and holders of dollars. But I'm talking about what would be good in steady-state. In steady state, borrowers take expected inflation/deflation into consideration. So the net result would be the ratio of home prices and mortgages to income would fall (which would be a good thing, IMO, because I think Americans have too much debt).