Quote from: huhai0978 on July 04, 2013, 07:44:42 PM

Look at those guys in the loan section of this forum. They are going to bankrupt. Lending an deflation money is a Ponzi scheme!!!

Bullshit

Quote from: Vycid on July 04, 2013, 07:48:21 PM

Let's suppose we're now using a currency with 10% deflation. Joe wants to lend Bob 100 currency units. In order to make a 5% profit, this means Joe must lend at -5% APR.

Wait - that doesn't work! Bob could borrow 100 units, sit on them for a year, and return 95. Joe has made a 5% profit, but Bob has actually come out ahead!

So Joe could simply sit on his currency for a year, and make 10% profit instead of the 5% he'd make from a loan with 5% inflation-adjusted APR. In the inflationary scenario, Joe would have been willing to lend out his money at 0% inflation-adjusted interest just to avoid losing money from inflation!

It's easy to get confused by deflationary economies: you must think the other way around.

Since I can sit on my money and be happy, I will obviously ask for something more if you want a loan.
Let's say I factor in 2.5% default risk plus 2.5% profit, I'll still ask you a 5% interest on your loan.

People should stop thinking that "deflation is magic": it isn't. Absolute values don't matter: what matters are how much you are rich relative to other people... if money deflates for everyone, then it's not an issue. And since people want to try to get richer, they will still try to invest them, hoping to get more than they would get just thanks to the deflation.