Post
Topic
Board Economics
Re: Is deflation truly that bad for an economy?
by
tee-rex
on 19/04/2015, 12:49:44 UTC
I think some reality check is urgently needed. You insist that deflation mirrors inflation, and I take crazy numbers for an example. Okay, you have 3% inflation and a real interest rate of 2%, not something that you would call crazy, right? What will the real interest rate then be for the deflation of the same 3% according to your logic?

You cannot have 3% deflation and only 2% real interest rate in steady state, long term.

I was talking about 3% inflation and 2% real interest, as you seem to have failed to notice. Is it not possible? If it is (possible), then according to your logic (deflation mirrors inflation), the same should necessarily hold true for deflation, right? If it doesn't after all (which is obviously not possible due to the lower limit of 0 for the nominal interest rate under deflation), then your logic is not consistent,  your premises are wrong ("all other things being equal"), and your inferences are false ("deflation mirrors inflation"). As simple.

Why do you continue arguing, for the sake of argument?