Re:U.S. economy shrank at a 1.4% annual rate in the first qu...
by imtringued on Friday April 29, 2022 @05:38AM
(#31203212)
>I think nominal GDP targeting is pretty bad policy though. Deflation can be a great thing for people, if its focused in the right areas.
Only if accompanied with a negative interest rate so that the real interest rate is 0%. The problem with deflation is that it raises the real interest rate, even though nobody signed a contract "hey if deflation is 5% I will willingly pay a real interest rate of 5%". When you consider that deflation primarily happens in economies that don't need further growth, paying that interest rate is not good for society.
Only if accompanied with a negative interest rate so that the real interest rate is 0%. The problem with deflation is that it raises the real interest rate, even though nobody signed a contract "hey if deflation is 5% I will willingly pay a real interest rate of 5%". When you consider that deflation primarily happens in economies that don't need further growth, paying that interest rate is not good for society.