• David J. Shourabi Porcel
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    3 months ago

    China owns large parts of the debt of the US. Deflation makes them stronger.

    I don’t follow you here. How does deflation in China make the debt of the US stronger? Am I understanding you wrong?

    If the renminbi appreciated over time against the US dollar, dollar-denominated debt held by the People’s Republic would yield less and less, wouldn’t it?

    • @wewbull@feddit.uk
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      2 months ago
      • Inflation makes the purchasing power of a dollar smaller
      • Deflation makes the purchasing power of a dollar larger

      I owe you $100. Over time the value of that $100 debt goes down with price inflation. You charge me interest to make up for this fact and make some profit also.

      If prices deflate the value of the $100 debt goes up, but you’re still going to charge me interest. When I pay you back, not only can you buy more with the $100 than I could when I borrowed it, you’ve charged me for the privilege.