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Debt deflation is a theory that recessions and depressions are due to the overall level of debt rising in real value because of deflation, causing people to default on their consumer loans and mortgages. Bank assets fall because of the defaults and because the value of their collateral falls, leading to a surge in bank insolvencies, a reduction ...
The real value is the value expressed in terms of purchasing power in the base year. The index price divided by its base-year value / gives the growth factor of the price index. Real values can be found by dividing the nominal value by the growth factor of a price index. Using the price index growth factor as a divisor for converting a nominal ...
A debt is a deferred payment; a standard of deferred payment is what they are denominated in. Since the value of money – be it dollars, gold, or others – may fluctuate over time via inflation and deflation , the value of deferred payments (the real level of debt) likewise fluctuates.
Essentially, inflation lowers the real value of debt, making it easier to service, but it also eats away at the average citizen's purchasing power. This isn't a new strategy, either. The U.S ...
That’s basically how we got from a $6 trillion national debt in 2001 to a $33 trillion debt in 2023. So what’s the plan? There are a variety of ways to get the debt under control. It doesn’t ...
Economists generally believe that a sudden deflationary shock is a problem in a modern economy because it increases the real value of debt, especially if the deflation is unexpected. Deflation may also aggravate recessions and lead to a deflationary spiral ( see later section ).
Rising government debt levels have seemingly always been in the headlines. In recent years, U.S. debt levels have become political, with one side of the aisle often refusing to raise the debt limit...
When debts are denominated in money, the real value of debts may change due to inflation and deflation, and for sovereign and international debts via debasement and devaluation. Store of value Main article: Store of value