Quote from: dinofelis on March 27, 2015, 02:04:44 PM

Quote from: tee-rex on March 27, 2015, 01:59:34 PM

So you don't what to deal with the simplest case and hope that if you complicate matters, it will somehow help you? Okay, there is 5% deflation (and 5% inflation) already under the way. Nominal interest rate is 0% under deflation, and 5% under inflation.

You cannot have 0% nominal interest rate under 5% deflation, and only 5% interest rate under 5% inflation. Their difference should equal 10%, not 5%.

Otherwise we are in different conditions of real interest, that is, borrowing would be much more expensive in real terms under your deflation conditions than under your inflation conditions. The whole point is that for every percent of inflation, the nominal interest rate will also rise with one percent, and for every percent of deflation, the nominal interest rate will also decrease by one percent.

So if you want to consider 0% interest rate at 5% deflation, you should consider 10% interest rate when there is 5% inflation.

You are obviously trying to push you logic unto real things. Why should their difference be equal to 10%? Just to suit your considerations? The lower limit of interest rate in deflation is set to 0 (below that no one will lend to you), the lower limit in inflation is determined by the rate of inflation, so 5% interest rate under 5% inflation is quite possible. In fact, it can even be even lower than that.

I'm talking about what happens in reality. And in reality deflation as well as inflation has beginning.