If interest rates fall, prices for loans fall, and firms borrow more. So the argument in your snippet doesn’t make sense.
Deflation is good for lenders, bad for borrowers.
Inflation is good for borrowers, bad for lenders.
Why should one be ‘better’ than the other?????
Why is deflation (a gradual lowering of prices) necessarily “bad”???
Deflation does not mean people “won’t invest”; real capital gains are still an incentive to invest in that particular situation.
I am not a deflationist, I am simply saying that inflation has it’s downsides, too — and in a number equal to those of INflation. Neither is “better” or worse than the other.
" marks. For one reason or the other FR's format program refused to recognize them.
No, that's not what I said.
First, recognize that an improvement in productivity may or may not be reflected in a price decrease. Sometimes it shows up in other ways that a company does business, e.g. borrowing less money, seeking funds in capital markets, and maybe even telling the employees lies and whacking their salaries ~ and since you always have some Democrats on the payroll they're going to believe that laying off workers always means the company is in trouble and they'll go along with getting their paychecks trimmed.
In general, though, over the long run, productivity improvements do have a deflationary impact.
Leaping ahead to the end, deflation is less readily dealt with than inflation. You cannot, after all, set a discount rate less than 0%.
Firms borrow to expand or retool. There may well be limits to how fast they can handle new capital, or possibly they have a saturated market and there's no reason to expand.
A major drop in demand for new loans can unleash deflationary forces.
Watch the price of houses drop like a rock!