Not at a computer due to thanksgiving so unfortunately can’t get in depth here but as far as deflation being horrible look at the 20 years after the civil war. Deflation is very rare due to everyone realizing how awful it is. 1% loans do not work because loans cost money to give out(pay the banker salary) and some default which also costs money. It is better to not loan at all than to loan at 1% because of that. Exceptions are bonds from massive institutions but small business is absolutely fucked.
That time period was the best performance of any economy in history up to that point and has been largely unsurpassed in "Wow!" factor until the miracle that is modern China. The post civil war era was when the US established the foundations of the economy that became globally preeminent for a century. If that is the economy being killed, maybe we should kill more economies.
This sort of thing drives me crazy. I ask for examples of deflation being a bad thing and I get "well there was the time the US became a global economic colossus, that was pretty bad".
> 1% loans do not work because loans cost money to give out(pay the banker salary) and some default which also costs money.
1) You missed the argument. The argument is that if a loan doesn't make economic sense then it is stupid to adjust the entire monetary system to encourage people to do stupid things.
2) The argument is just wrong. I'd lend money at 1% if I was making a real return.
But you wouldn’t make a return because some loans default and the person you pay to screen debtors costs than you make. At the end of the day your business would have less money than it started with.
The us became an economic colossus before the civil war and in the early 20th century. 1873-1893 was absolutely horrible for Americans.
That is absurd. The premise here is there are different nominal scenarios with the same real return. It isn't possible to make the same real return and be worse off. The risk of default hasn't changed.
If you think 2% real return is too low you can just pretend I chose a higher number. It doesn't change the argument.
> The us became an economic colossus before the civil war and in the early 20th century. 1873-1893 was absolutely horrible for Americans.
So your position here reads a lot like the economic situation that led to a civil war was the good part, but the era where the US set themselves up and overtook the British and Chinese empires was a good example of an economy that is best described as "horrible" and "killed".
Are you sure that this is the best example you have of deflation being a bad thing? You might want to pick a different example - maybe one from an era that wasn't characterised by rapid improvements in economic power leading to a century of commercial dominance. I haven't even got to the point in the thread where I bring up that this horrible era was just after, you know, a civil war. It might be that that was the reason people felt badly off rather than goods and services getting cheaper in nominal terms.
There is a floor for nominal interest rates below which operating the business costs more than the business makes. That floor is higher than 1%. We were not too far from it during Covid. If we had deflation real interest rates would have to increase because nominal rates can barely go down. Real rates going up is again very bad for the economy.
