<Deflation destroys wealth>Actually, deflation increases the value of cash.Not if you have debt. The government has debt. In fact, all governments have debt. Governments depend on tax revenues to pay that debt. If the money supply contracts (deflation) how will it pay those debts? Can you imagine having $13 Trillion outstanding in treasuries and reducing the debt supply as well? Sorry, but I stand by my original statement. Deflation destroys wealth.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.Yes. Nobody was able to purchase anything, because nobody had money. It may be true that if you're sitting on a mountain of cash (not stocks, not bonds, not gold, but actual dollar bills) you'd benefit from deflationary policies. But, in point of fact, no-one actually sits on cash.It is inflation that destroys savers, by eroding the value of every saved dollar.What does savings have to do with wealth? What will happen to the bank that has your savings, in a deflationary economy? They are going to have trouble servicing their debt to you, as well as their debt to their other creditors. And, on a very fundamental level, savings for you is a debt for the bank. Can the bank really service the debt on their debt of $100,000 to you, as well as the thousands of other savers in their accounts? It's hard to imagine. Does the phrase "run on the bank" mean anything to you?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.The value changes if you're also losing the rest of your investments due to inflation and can't service your debt. Here's the deal. Debt is owed in yesterday's dollars. It doesn't matter whether the money supply inflates or deflates. It doesn't matter whether your dollar will now buy you 5 Big Macs instead of just the one. If you owe $5000, that's what you owe. It doesn't even matter if the debt is someone else's savings. It's still owed at the previously inflated amount, not at the currently deflated amount.Deflation destroys wealth by removing investment capital that should have been paying off existing debts.
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