Reply To: Loans and falling prices and wages


That is the problem with borrowing money. In a deflation people complain that their income is not paying off their loan fast enough because when they borrowed there was more money going around before they took out that loan. Then deflation contracted the money supply after the date the loan was taken out, meaning less units of currency to go around. Your loan stated you will pay back a certain amount no matter what happens in the future. Your contract does not state it can be adjusted due to deflation, in short you better pray deflation does not come until after you pay off the loan. If inflation happened you wouldn’t care because that contract says you owe this amount, but you would be getting more units of currency through the expansion of the money supply. That would make it easier for you to pay off that loan. In other words be damn sure you can afford to pay off the loan, and saving should be number 1 in your things to do everyday. It’s just easier to use your own money than somebody else’s money due to uncertainty of the future.