2 ms·
Because unless your investment expectation in greater than the deflation value, you won't invest. Loans become too expensive and the default rate will be higher
by orwin 6y ago
Because unless your investment expectation in greater than the deflation value, you won't invest. Loans become too expensive and the default rate will be higher since there is less investment. And no more thing such as buying on credit. And if banks don't loan money and credit become a thing of the past, the money supply disappear.
Also, unless deflationary money is decoupled from production , production will crumble and you will enter hyperinflation quickly.
- tastyfreeze 6y agoThose all would be temporary effects as everybody adjusts. People still need to have a place to live, food to eat, cloths to wear, and ways to be entertained. Its not like everybody just stops spending money. They just get rewarded for whatever they have in savings. With savings people have more ability to take risks on investments. Deflation builds value in an economy.