Deflation does not cause money hoarding any more than wet pavements cause rain. Money hoarding--driven by animal spirits--causes deflation when the Government does not meet it's responsibility as the currency monopolist to print money that people desire to hoard....Winterspeak
If your nominal income stays the same and your nominal mortgage stays the same, how will a change in the real value of anything have any impact?
Debt is nominally denominated, it's just a number in a spreadsheet somewhere, just as currency is. Nominal problems need nominal solutions, otherwise they become real problems and you get high unemployment and the various social ills that come from that.
Wet pavements don't cause rain
Money hoarding--driven by animal spirits--causes deflation when the Government does not meet it's responsibility as the currency monopolist to print money that people desire to hoard.... winterspeak
ReplyDelete"Animal spirits" my ass! When the counterfeiting cartel, the banks, are lending then the only options for most people are borrow from it or be priced forever out of the market by those who do borrow. Thus it is a rational decision to borrow from the banking cartel - given its existence.
And during the inevitable busts, it is a rational decision by the banks NOT to lend into a depressed economy.
And deflation can most certainly cause money hoarding as people seek to protect themselves from increasing economic insecurity - thereby helping to bring on that insecurity in aggregate.