Debt Deflation
Posted on September 18, 2009 at 3:30 am
What is Debt Deflation?
It is a situation in which the collateral (usually a home) that was used to secure a loan decreases in value.
Posted on September 18, 2009 at 3:34 am
What is debt deflation?
Okay here's a scenario, a consumer was able to purchase a home by taking out a mortgage. That loan wouldn't have been possible without collateral, the home was used as collateral. So if the consumer defaults on payments to the lender, the home would be repossessed.
What if the potential selling price of the home decreased in value while the consumer was still making payments to the bank?
Posted on September 18, 2009 at 3:56 am
The consumer would be in the middle of a debt deflation scenario.
And so? I mean what happens then?
Posted on September 18, 2009 at 4:16 am
The consumer still pays for what he owes.
Posted on October 1, 2009 at 3:20 am
how possible is a debt deflation