Awesomelyglorious wrote:
So, the issue is that there IS a real difference between inflation and deflation. So, with inflation the price of everything rises, but that can usually be accounted for by simply adding interest. So, if an interest rate starts off at 8%, and then there's inflation of 3%, you can just add these together to get 11%.
Well, the issue with deflation is that deflation gives an incentive to simply hold on to money. So, if there's a deflation rate of 3%, if you simply remove your money from the system, you'll get some return. The problem is that the more people who remove their money from the economy, the worse the economy works, as the more money that is removed, the more extreme deflation gets. This is called a deflationary spiral, and some economists believe that the Great Depression was largely due to a deflationary spiral. Some more information can be found here:
http://www.investopedia.com/terms/d/deflationary-spiral.aspYup when people take money out it creates huge, huge issues. Right now so much of the US monetary units simply vanish into offshore accounts.
Then we got cartels laundering many millions, perhaps billions of dollars into the US economy. No wonder things is so messed up!
When discussing the economy, these serious issues are often ignored like they don't exist and yet we see so many problems with our economy. Money just seems to disappear replaced by mountains of debt. There just never seems to be enough money.