Re: Explain to an idiot the benefits of going back to the Gold standar
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If the future value of money becomes *greater* than the present value of money, why would you ever make a loan - especially at a low interest rate - when you could hang onto the cash instead? Even if you were willing to make that loan, what kind of sucker would it take to accept it?
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Would a deflation rate of 2-5% really be that devastating that people wouldnt take on any loans? The rate of deflation would just be calculated into the interest rate that the debtor is receiving. And since all other prices are dropping you have more money to spend maintaining your debt.
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Except for that to work wages would have to fall in order for companies to remain in business, so (if wages were downwardly elastic enough..which they arent) you wouldnt have more money to spend maintaing your debt.
Deflation devalues inventories of durable goods, drivces down stock prices and makes existing non-callable bonds extremely expensive. "moderate deflation" has f^&(ing disaster potential.
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