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| User Info | Why we will experience deflation; entered at 2007-12-02 02:56:34 | |||
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Shrpblnd Posts: 1203 Registered: 2007-08-06 Los Angeles, CA 
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Remember that during deflation, while your nominal interest rate may stay the same, the REAL interest rate is increasing, because dollars are becoming more valuable. Real interest rates are defined as the nominal rate, minus the rate of inflation, or ADDED to the rate of deflation. The problem is your debt grows during deflation because interest is accruing. However, your salary, or other forms of income, are likely to be reduced. Eventually, you lose the ability to service the debt, and will be in default. 2007-12-02 02:56:34
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