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"Deflation reduces the value of real assets financed with debt". Explain why?


"Deflation reduces the value of real assets financed with debt". Explain why?

Deflation reduces the value of all assets, not just those financed with debt.

But anytime debt is involved the "leverage" heightens the changes in the asset value.

So if you bought a house for $100,000 and borrowed $90,000 and put in $10,000 of your own money. A 10% increase in the house value doubles your money and a 10% decrease in the house value wipes you out.

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