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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (27902)	1/26/2003 6:22:49 PM
From: Ilaine	Read Replies (3) \| Respond to of 74559

>> Would you agree with that?<< True, but it's not mysterious, either. Interest rates can't go below zero in times of deflation, so firms can't repay old loans without dipping into operating capital. If they can't service old loans, they can't make new loans. That's the debt-deflation spiral that got most of the world in the 1930's, due to the gold exchange rate being set too high. That same debt-deflation spiral got the Japanese due to way too many loans and an aging population. My argument is that debt in and of itself isn't an evil as long as you can service your debt load. Deflation isn't an evil as long as you don't owe a lot of money. Simultaneous debt and deflation is a killer.