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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35339  
Subject: Re: "Long Bond" - buying and rolling Date: 2/12/2006 6:07 PM
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<Deflation destroys wealth>

Actually, deflation increases the value of cash. During the Great Depression, anyone with cash saw their purchasing power increase. My grandmother told me that land and property were cheap, and she wished she could have bought...but she was short of cash, as were the desperate sellers.

It is inflation that destroys savers, by eroding the value of every saved dollar.

Deflation may be said to destroy wealth, if one's wealth is in assets whose value is dropping. However, if your house value is dropping, so is everyone else's...so the exchange value doesn't change.

Deflation also makes it difficult for businesses to prosper, since buyers hold off purchases, waiting for prices to drop.

< and erodes the ability of the government to levy taxes. No government purposely enters a deflationary period. The goal is measured inflation.>

Yes, we agree on this.
Wendy
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