[quote=barnaby33]
I was going to disagree with you but you are correct. Its not paying back the debt that is deflationary, its the chilling of further lending caused by default that is. thanks.[/quote]
Well, its doubly bad when its a debt default. Not only am I hesitant to lend out more dollars, I have even less dollars to lend out then before. Potentially negative dollars in a fractional reserve system, as well.
I also think there is problem when people get inflation/deflation of the money supply mixed up with price deflation. One almost always causes the other, but there are always exceptions.
