The reason deflation is so highly feared is because it increases the value of debt. In particular, government debt. China owns large parts of the debt of the US. Deflation makes them stronger.
Not exactly. Deflation basically slows down the economy. If you think your money will worth more tomorrow, then you are less likely to invest/spend them.
But the whole purpose of money is to be used. Money is a tool, the oil that facilitates trade and keeps the economy going. And while too much money(oil) can overheat the economy(inflation), too little money can straight up bring the economy to a halt(deflation).
Deflation, even in small amounts, is more dangerous, thats why ideally you prefer having a small amount of inflation.
Deflationationary phases are very helpful for the working class, as their dollar now buys MORE things. Like food. And housing. And health care.
What kind of braindead take is that? The working class? The same working class that majorly lives paycheck to paycheck and can’t even afford an unexpected $500 expense?
What dollars do you think they are going to have in a deflationary economy after they get laid off?
You know in what form those paychecks generally come in? Cash, so their paycheck is now literally worth more without wage increases (which aren’t horribly stable for those generally loving paycheck to paycheck).
It’s not just consumer spending that influences inflation,/deflation but also institutional spending. The consumer price index is a lagging indicator. Decreases in institutional spending precede unemployment and the eventual reduced demand for consumer goods and services. And increases in the fed rate (and/or other forces which cause the cost of borrowing money for institutions/investors to rise) generally precede that.
Institutional spending will decrease as credit markets seize up. If deflation is predictable at, say, 1-2%, then it shouldn’t be a factor since credit would account for that.
“The economy” in this instance being a playground for the rich.
People won’t stop paying for food or rent just because their money might be worth a little more tomorrow. They won’t skip buying minor entertainments just because maybe their meager salaries might be worth a little more next week.
Deflation is poison for the owner class, not the working class.
“The economy” in this instance being a playground for the rich.
People won’t stop paying for food or rent just because their money might be worth a little more tomorrow.
Indeed, people won’t stop paying for everyday necessities, but the economy consists of more than just individual people: there’s the state and there are businesses too. You conflate the latter with “the rich”, which is generally true for corporations, but corporations are not the only form of business; there are cooperatives, partnerships, and others which can distribute profits more fairly. In any case, deflation affects all businesses, including fair ones, and the state itself. As another commentator suggested, money is meant to change hands and should never become an asset worth holding.
You conflate the latter with “the rich”, which is generally true for corporations, but corporations are not the only form of business; there are cooperatives, partnerships, and others which can distribute profits more fairly.
And if those other types of business don’t place “Profit maximization” as their primary focus, then a deflationary period wouldn’t be bad for them, either.
Again, it’s only bad for people with debt. And the more debt you have, the worse delfation is for you.
Debt, is really only “good” if you are a corporation. Because debt lets you spend a load of money that ain’t yours, and getting the working class deep into debt is a good way to ensure you have a decent slave labor force.
Complete layman’s take on deflation, but wouldn’t trading basically stop with deflation?
Say I buy a product for 4$ and the next day due to deflation I can only sell it for 3$, why would I then go and try to trade said product?
It would be bad to have anything on shelf for a prolonged period. Food would probably not be affected due to its short shelf-time, but hardware stores, electronics, basically anything else would have the risk of significant losses. These stores would simply close, no?
That also extends to global trade - big cargo ships are sailing for weeks before they can distribute their goods. The whole time the products would loose value.
Probably I’m wrong, but if that’s true, deflation would really make the shit hit the fan.
Say I buy a product for 4$ and the next day due to deflation I can only sell it for 3$, why would I then go and try to trade said product?
That $3 is worth as much as that $4 was now because deflation made the value of the dollar go up. So the only change is that “number go up” didn’t happen on a purely psychological level. If your trade provides value then you can trade for more value.
True, the sentence about the items loosing value is incorrect.
However, my argument is still valid, why would I go and buy the thing in the first place, if I just could have waited for today and still have 4$?
I would have „gained“ a dollar by doing nothing instead of taking the trouble of procuring the item.
Because deflation isn’t going to be at that rapid a pace. If inflation was such that an item priced at $3 today gets priced $4 tomorrow, that means a daily rate of change of ~33.33% which is an insane rate of inflation and would be a problem as well, but nobody uses that to claim inflation is absolutely bad.
Who is going to hold off on buying something if it’s 2% “cheaper” after a whole year? People certainly don’t put off buying phones even though phones still get way higher than 2% increase in performance every year or two.
Up until the 20th century it wasn’t uncommon to have cycles of inflation and deflation.
https://iamkate.com/data/uk-inflation/
The reason deflation is so highly feared is because it increases the value of debt. In particular, government debt. China owns large parts of the debt of the US. Deflation makes them stronger.
Not exactly. Deflation basically slows down the economy. If you think your money will worth more tomorrow, then you are less likely to invest/spend them.
But the whole purpose of money is to be used. Money is a tool, the oil that facilitates trade and keeps the economy going. And while too much money(oil) can overheat the economy(inflation), too little money can straight up bring the economy to a halt(deflation).
Deflation, even in small amounts, is more dangerous, thats why ideally you prefer having a small amount of inflation.
This is only accurate if you measure economic success by “Corporate profits”.
Deflationationary phases are very helpful for the working class, as their dollar now buys MORE things. Like food. And housing. And health care.
What kind of braindead take is that? The working class? The same working class that majorly lives paycheck to paycheck and can’t even afford an unexpected $500 expense?
What dollars do you think they are going to have in a deflationary economy after they get laid off?
You know in what form those paychecks generally come in? Cash, so their paycheck is now literally worth more without wage increases (which aren’t horribly stable for those generally loving paycheck to paycheck).
If they still have a paycheck, sure. But historically, deflation leads to unemployment.
You’ve got that backwards. People get laid off, can’t buy things, then prices go down because demand is lower.
It’s not just consumer spending that influences inflation,/deflation but also institutional spending. The consumer price index is a lagging indicator. Decreases in institutional spending precede unemployment and the eventual reduced demand for consumer goods and services. And increases in the fed rate (and/or other forces which cause the cost of borrowing money for institutions/investors to rise) generally precede that.
Institutional spending will decrease as credit markets seize up. If deflation is predictable at, say, 1-2%, then it shouldn’t be a factor since credit would account for that.
“The economy” in this instance being a playground for the rich.
People won’t stop paying for food or rent just because their money might be worth a little more tomorrow. They won’t skip buying minor entertainments just because maybe their meager salaries might be worth a little more next week.
Deflation is poison for the owner class, not the working class.
Indeed, people won’t stop paying for everyday necessities, but the economy consists of more than just individual people: there’s the state and there are businesses too. You conflate the latter with “the rich”, which is generally true for corporations, but corporations are not the only form of business; there are cooperatives, partnerships, and others which can distribute profits more fairly. In any case, deflation affects all businesses, including fair ones, and the state itself. As another commentator suggested, money is meant to change hands and should never become an asset worth holding.
And if those other types of business don’t place “Profit maximization” as their primary focus, then a deflationary period wouldn’t be bad for them, either.
Again, it’s only bad for people with debt. And the more debt you have, the worse delfation is for you.
Debt, is really only “good” if you are a corporation. Because debt lets you spend a load of money that ain’t yours, and getting the working class deep into debt is a good way to ensure you have a decent slave labor force.
Complete layman’s take on deflation, but wouldn’t trading basically stop with deflation?
Say I buy a product for 4$ and the next day due to deflation I can only sell it for 3$, why would I then go and try to trade said product?
It would be bad to have anything on shelf for a prolonged period. Food would probably not be affected due to its short shelf-time, but hardware stores, electronics, basically anything else would have the risk of significant losses. These stores would simply close, no?
That also extends to global trade - big cargo ships are sailing for weeks before they can distribute their goods. The whole time the products would loose value.
Probably I’m wrong, but if that’s true, deflation would really make the shit hit the fan.
That $3 is worth as much as that $4 was now because deflation made the value of the dollar go up. So the only change is that “number go up” didn’t happen on a purely psychological level. If your trade provides value then you can trade for more value.
True, the sentence about the items loosing value is incorrect.
However, my argument is still valid, why would I go and buy the thing in the first place, if I just could have waited for today and still have 4$? I would have „gained“ a dollar by doing nothing instead of taking the trouble of procuring the item.
Because deflation isn’t going to be at that rapid a pace. If inflation was such that an item priced at $3 today gets priced $4 tomorrow, that means a daily rate of change of ~33.33% which is an insane rate of inflation and would be a problem as well, but nobody uses that to claim inflation is absolutely bad.
Who is going to hold off on buying something if it’s 2% “cheaper” after a whole year? People certainly don’t put off buying phones even though phones still get way higher than 2% increase in performance every year or two.