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Final-Fan on 13 July 2010
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Akvod said:

Kasz216 said:
I find it funny that Akvod thinks saved money is still stuffed in matresses or buried in the backyard or something...

It pretty much is as good as doing so during a deflation. Why would you give a loan during a deflation? Say you wanted to make a 2% return on your loan. The inflation rate is -5%, so the interest rate should be -3%, that is, you giving money to the person you loaned to. Will you do that?

Whereas if it was positive 5%, it'll be you demanding a 7% interest.

So loans at 0% interest would be unattractive in a -5% deflationary economy? 



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