Eli5: why can’t we just “deflate” money, and why is it bad?
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Deflation is the opposite of inflation: money getting more valuable with time (and goods and services getting cheaper). We CAN do that, but we don’t do that.
It sounds great: the longer you hold onto your money, the more it’s worth! Want to buy something, well, just wait and it will become cheaper!
The problem is that if your money is worth more the longer you hold on to it, and things get cheaper the longer you wait to buy them, then there’s really no incentive for you to buy stuff now (maybe food, toilet paper, and medicine).
In fact, you’re best off if you hoard all your money and don’t buy anything you don’t need immediately. This is a problem for people that sell stuff or do stuff for money. If people stop buying stuff or hiring people to do things, they aren’t making money, and they don’t need to buy stuff, they don’t need to make stuff, and they don’t need as many people (to make, sell, or do things). You’d expect many companies to fail and people to lose jobs. Money will stop changing hands as quickly.
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