I think there are just two confusions between Rich and cyphire. To Rich’s point, the price decline does not destroy wealth. There will still be as many houses in US and as much ownerships of corporations (and their long-term profitability remain the same, if everyone is as optimistic about the long-term future as I am). But to cyphire’s point, although the overall wealth remains the same, the distribution of the wealth will be greatly changed. So cash is king in a deflationary environment. Bob will end up richer.
The only thing against Rich’s argument is that the wealth shift could create wars and destroy the wealth. People can kill each other with guns because of poverty and human being has enough capability to nuke the world. Then the wealth is truly destroyed and we go back to the stone age. In a less dramatic version, someone could be too poor to get the needed health care and we lost productivity (and future wealth) due to that.
