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"With deflation raising its head in Europe many economists believe that a devaluation of the Chinese currency will hit Europe like an economic broadside – in pa
by hackaflocka 12y ago
"With deflation raising its head in Europe many economists believe that a devaluation of the Chinese currency will hit Europe like an economic broadside – in particular the economies with the most debt (ahem) whose repayment requirements will grow substantially under continued deflation."
I'm pretty good at macro-economics, but I couldn't understand this sentence.
Perhaps it's just a mainstream media attempt to confuse the reader into thinking he/she doesn't really know economics.
But if you think you have a handle on what this sentence means, I would welcome your interpretation. Hit reply below and fire away.
- danmaz74 12y agoInflation is good for debtors, because as the value of the currency shrinks, so does the value of your debt, that becomes easier to repay in real term - with inflation, salaries grow nominally, tax revenue grow nominally etc. With deflation, the opposite happens.
- hackaflocka 12y agoExcellent explanation. Thanks.
- popsc 12y agoI concur w/ danmaz74’s statement. But what is the cause and effect relationship of “devaluation of the Chinese currency will hit Europe like an economic broadside “ . Is it less Chinese purchases of European goods?