The Cow wants NEGATIVE interest rates...
Why isn't Deflation such a wonderfull thing?
Deflation is a wonderful thing it discourages malinvestment, and savers benefit, there are 5 billion that live today in a world of scarcity that you predict will ensue with deflation, deflation isn’t bad, and it implies big change for the other 20% who will have to change there thinking and lifestyles.
Why is inflation seen as a good thing?
No the question here is why NEGATIVE interest rates are bad?
Hey guy you wanna lend me a bit of money? I'll pay 10% interest. Of course it will be negative interest so you will get back 90% of what you lent me. The more the better, I can pay back the day after!
Cool so bitcoin's deflation is diffrent because...?
... I won't lend my Bitcoins to just anybody. If I lend them it will be to fulfill a need not a want.
Thats not the issue I am hinting... are you going to ask for interest?
It depends!
Interest is the cost of money. Generally an economy is complex, so complex it should only be measured not managed, in general if the economy is growing - increasing goods and services, there will be less demand for money, a rational player will save and not lend as the law of supply and demand will yield a higher return from saving. If the economy is shrinking and the demand for goods and services is unsatisfied, there will be an increasing demand for goods and services and thus a demand for money with interest.
I make it simple for you
Assuming a bitcoin economy with a steady deflation of 2%. Would you lend me 10 BTC at -1% interest? why?
Most probably not, my goal is to preserve my wealth, the risk of default is not worth the marginal gain, now if you were my nephews friend asking for a student loan I would consider lending you the money. With no interest if you had the right attitude.
I will only consider working with my money if there is inflation. Any deflation = saving.
Would you be interested in recieving the above loan? what would you do with that money?
As a rational player it would depend of a lot of variables.
Who is making the loan and why?
Do I have a job, or am I an entrepreneur or do I have a cash flow problem?
To buy a house: no.
To supplement my income: no, on second thought, maybe, what is my jurisdictions position on moral hazard?
As a loan to start a business, No, I’d consider a joint venture capital risk for labour risked.
For cash flow in a well established business, yes. If it made sense.
Me personally in my current position, I’d tell the lender 0% interest and a 5% stake in my venture or hit the road.
