Tuesday, November 11, 2008

Flashback: Inflated Deflation

Citigroup announced today that it would renegotiate home mortgages as part of " sweeping efforts to try to curtail losses from souring mortgages."

I think deflation is unlikely. But if it did occur, its harm would be limited, in part because (unlike the 1930s) mortgages are being widely renegotiated in light of the new economic situation. Renegotiations like that could readily account for deflation-induced reductions in homeowner incomes.

Will the property tax assessors now do their part?
[added Nov 19: I changed by mind. This is bad news, not good. See my post "UI on steroids"]

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