If you’re a net debtor, you hate deflation. Paying back a debt with more costly money makes paying it back more difficult and it takes more of your resources to do so, at a time when you’re probably collecting less revenue as well…think state and local govt. The govt is the biggest debtor. They dont want deflation. But it remains to be seen whether or not they will get their wish. Savers and holders of money benefit the most from deflation.
I think a very likely scenario will be that all these unemployed people will probably be less likely to pay their car loans, credit card loans, student loans and mortgages,etc.. as they remain unemployed. This will fuel another wave of defaults. And we’re back on the deflation cycle once more.
I think it’s a very important thing to consider where employment will be growing to fuel an economic recovery. Next month over 100K college grads will be looking for work as well as the all the unemployed we’ve been racking up for the last 6 months…and continue to add to the ranks.
