Article;
Both America and Europe Central bankers should be pushing prices upwards perils falling.
Comment;
We prefer inflation over deflation because it reduces the
value of debt in terms of sacrifice made to repay a loan... Inflation makes the
value of money to fall... and if inflation starts falling it increases the
value of money in-hand and we will sacrifice more this time... This is a
standard explanation "why we choose inflation over deflation..?" But
as far as income is concerned it is fixed in the short-run and if under this
condition prices start falling within limits it should be a gain because people
will save more and will repay their debt soon... This is totally meaning less
to assume that the debt condition will deteriorate... Falling prices will
release more money for debt-repayment... We use both, fixed and floating kind of interest rates for loan repayment and the banks can adjust interest as
per the client's real sacrifice. In this condition banks should try to
neutralize the sacrifice. They should move interest rates to achieve this
end... Floating rates are (i think) are more appropriate the neutralize the
sacrifice...
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