Its a financial loss. If you have 100,000 dollars in the bank and your bank pays out 1% interest you lose money. The banks interest rate is below the inflation rate. So after one year that 100,000 turns into 101,000 right? Well say that was from the yaer 2006. Well in order to buy something that once cost 100,000 dollars in 2006 will now cost 104,000 in 2007. So its a loss of 3,000 dollars. Why is’nt this loss tax deductible?