I don't think your maths is correct. If the currency is deflating at 2%, it is deflating regardless of whether it is the lender or the borrower holding it. If t

I don't think your maths is correct. If the currency is deflating at 2%, it is deflating regardless of whether it is the lender or the borrower holding it. If therefore this is lent at 1%, the real return is 3%, 2% by deflation, 1% through the interest rate. Hence it is more profitable to lend than hold.