Fishman wrote:"Understand, deflation in the 30's depression was painful and difficult; deflation in the 2010's would be lethal, and lethal, FAST"
Not disagreeing Agent, but please explain why you think such.
I fail every time I try to explain what I'm thinking on this topic, and it is just my opinion afterall. But an assumed positive inflation rate, with a coupled interest rate floating just a bit above inflation is built in to every assumption underlying every financial transaction.
Say I have a company with $100 in receivables, $5 in cash, and I have a $10 payroll obligation tomorrow and a set of rental payments totaling $30 next week. If I fail to make payroll, that's game over. If I fail to make rent, game over. I can borrow money against the value of my receivables though, or at least always have been able to in the past. So I go about the process and people loan me money for a day or three days based upon the value of the receivables, and I roll them over as they come due, essentially making my receivables work sorta like cash. What happens one morning and we're now in a deflationary spiral? Those people who were loaning money, now sit on it and want to be paid out on what they have outstanding, in cash they are making solid increases in value with no risk, no taxes. Meanwhile... my payroll is still due, but instead of $105 of effective liquid spendables, I got $5, if I'm lucky. When my employees don't get paid, there is no magic Easter Bunny that will show up and pay their light bill or their mortgages. The company is done. And those employees are hosed; and it won't take months or years to come all unglued; it'll take hours.
There are no limits to which those in power will go to prevent a deflationary condition in any of the world's major trading currencies. Because the penalty for deflation, is annihilation.
Right now, you can honestly say things are kinda broken, interest rates are below even reported inflation, and they are WAY below inflation as reported on alternative measures. Everyone is still playing the game though because tomorrow's dollar is worth less than today's dollar, and any yield is better than none or all-risk-no-pay be lucky to escape with your hide...