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pikapp383
Hmmm, deflation means money now is worth more than money later.
A little bit of inflation is a good thing, it encourages investment.


No, deflation means money now is worth less than money later. That discourages debt, not investment.

A little bit of inflation is not a good thing. A little bit of deflation is a good thing. Most people tend to get slowly better off.

A lot of deflation hurts a lot, but if recognized the cure is much easier than it is to kill inflation.

Finally, steady inflation is economically a non-event, especially at low levels.

It is unexpected, inflation that can cause some beneficial effects. But it tends to be a one-time-shot until people catch on. That is why Keynes did not have a general theory like he claimed, but a specific one.
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pikapp383
Hmmm, deflation means money now is worth more than money later.
A little bit of inflation is a good thing, it encourages investment.

exmsftfool
No, deflation means money now is worth less than money later. That discourages debt, not
investment.

Sorry about that mistake, you are right, deflation means prices go down later, meaning your dollar buys more later than it does now.

But, that is precisely why it discourages investment. When you can get a "return" on your money by putting it in your mattress that means the marginal investment doesn't occur.

Anyway, this is the wrong board for that and I think we will probably disagree anyway.

Here's hoping the "correction" stops,
pikapp383
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I would sure hate to be in debt (mortgage) in a deflationary period. If my employer cuts my wages because of deflation, I still have to pay back the amount I borrowed in full. I'm stuck. Now with a little inflation, I get to pay off the mortgage easier because my wages have risen over time.

Richard
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A little bit of inflation is not a good thing. A little bit of deflation is a good thing. Most people tend to get slowly better off.--exmsftfool

Would you please explain the above. If wages and prices exhibit stickiness, especially downward stickiness, (aka the rachet effect) then a low steady rate of deflation will be more troubling than a low steady rate of inflation. I'm not refering to possible measurement errors in our CPI calculations, maybe that is your point????

geo
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I would sure hate to be in debt (mortgage) in a deflationary period.

That depends entirely on the real interest rate you are paying. In a world where the lendor expected deflation you would get a much better interest rate.

In general, you are only in trouble if the rate of inflation declines and you can't refinance.
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