3 ms·
Deflation favors debt payors instead of debt issuers/servicers, and our whole economy is constructed to favor the latter group, because having a "healthy" syste
by gen220 2y ago
Deflation favors debt payors instead of debt issuers/servicers, and our whole economy is constructed to favor the latter group, because having a "healthy" system of debt supports faster economic growth than a system with no debt. (in theory). The whole raison d'etre of free-floating govt-supplied fiat currency is to make deflation impossible.
We haven't had real deflation since bretton woods, when we gave up the gold standard.
- Sohcahtoa82 2y ago> Deflation favors debt payors instead of debt issuers/servicers Wouldn't that be the other way around? If I take out a $30K loan to buy a new car, and I'm paying $500/month, then if the economy happens to go through an extreme amount of deflation a year later and now brand new cars are only $10K, then as the payer, I'm still paying $500/month and $30K total, except that amount is worth a lot more. Whereas if massive inflation happens, the payer gets a huge benefit, assuming their salary keeps up with the inflation.
- deleted 2y ago[deleted]
- dexwiz 2y agoI think you are correct and GP has the right idea for wrong reasons. In the long term people will stop borrowing in a deflating economy which will harm debt servicers. Financial institutions collapse when your mattress is better place than a bank for money.