It’s hard to imagine that there would be any real interest rate if you were in a deflation economic climate. The real interest rate is going up.
If you take out one of the Dreamers, they would be in the job market and the real interest rate would be rising. But this is not going to be the case. If Dreamers have taken out Dreamers a few years ago, they would be back in the job market again. That’s why the economy has been so bad, and it has been getting worse.
It is a fact that the economy is a deflation economic climate. It’s not about deflation. It’s more about inflation. But for a lot of us that’s the point of the movie.
So the movie is basically saying that the economy is deflation.
No, the economy is not being really deflationary by any definition of the word. In fact, the term “deflation” is a misnomer. That is a term that is used to describe events such as inflation (when the price of something goes up) or deflation (when prices go down). The term is sometimes used to mean a contraction of spending, but that is a very different thing. It is the opposite of deflation, which is when prices go down.
If you have a small economy where spending is not necessarily very heavy, then it is possible that you have a deflationary economy. But it is not the case in the examples given in the movie. In a deflationary economy, there is usually a deflationary force that is pulling down prices. In a deflationary economy, it is possible that the economy is not really the one pulling down prices. Instead, the economy is being pulled down by a deflationary force.
The example given in the movie, with the real-life Japanese examples, is one of the most commonly-cited examples of this type of deflationary economy.
Deflationary economies are not real economies. In a real economy, the real interest rate is zero. In a deflationary economy, the real interest rate is much, much lower (which means the dollar is really devalued). In a deflationary economy, currencies get bought up by other currencies and so the real interest rate goes down.
While Japan has experienced a significant deflation (with the price of rice dropping by about 70% in a few years), it’s still the case that the real interest rate is much, much lower than under an inflationary economy. In fact, deflationary economies have been common in the U.S. for a while. The real interest rate in the U.S. is about half the official rate, and while the official rate is still far from zero it’s a lot less than half.
Real interest rates are low because the interest is derived from the price of the debt that a borrower has to pay to the lender. But with inflation, the amount of debt that a borrower has to pay to the lender increases and the money supply grows. As a result, it becomes less profitable to borrow in the first place, and so the real interest rate rises.