Wouldn’t it be good for the currency if we slowly steadily moved into deflation and at the same time lower the wages. Then the consumers wouldn’t have too much power, right? Or would it be a global perspective problem?
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No. Deflation is terrible for an economy. So much so that we tolerate a touch of inflation if for no other reason than to ensure deflation doesn’t happen.
In deflationary periods, money gets more valuable just sitting in a coffee can doing nothing. This may _seem_ good initially, but this means:
– Any debts you have get _more_ expensive over time, since the amount of the debt stays the same, but your income (likey) decreases to account for deflation. Servicing debt takes a higher percentage of your income.
– There is less incentive to invest, making it more expensive to take out loans or start businesses. This means fewer people are able to afford college, afford a home, buy a car, take a risk, etc.
– Consumption and purchase are delayed as long as possible. If something is $100 today and $90 next month, you are best served by waiting until next month to buy it.
That last one is **really, really bad**. If you delay purchases, that drives down demand. With low demand, companies will sell fewer goods/services. Lower sales means staff reductions. Staff reductions means less money to spend, leading to more delayed purchases. It is a death spiral for any economy.
Slow deflation?
You mean, death spiraling deflation. Modern economix tools (namely interest rates and money policy) do T work in deflation, because you can’t lower interest rates below zero. While if expectations are for lower prices in the future, consumers, who in the US at 75% of growth, delay purchases on hopes of lower prices. Selling goods and services at lower prices means slowing or stopping production. Meaning layoffs / firing. So, wages for some consumers goes to zero, too. And repeat.
Some inflation, 2-4% is always preferred because things are growing, progress is happening and wages rise along with prices
No. Deflation is terrible for an economy. So much so that we tolerate a touch of inflation if for no other reason than to ensure deflation doesn’t happen.
In deflationary periods, money gets more valuable just sitting in a coffee can doing nothing. This may _seem_ good initially, but this means:
– Any debts you have get _more_ expensive over time, since the amount of the debt stays the same, but your income (likey) decreases to account for deflation. Servicing debt takes a higher percentage of your income.
– There is less incentive to invest, making it more expensive to take out loans or start businesses. This means fewer people are able to afford college, afford a home, buy a car, take a risk, etc.
– Consumption and purchase are delayed as long as possible. If something is $100 today and $90 next month, you are best served by waiting until next month to buy it.
That last one is **really, really bad**. If you delay purchases, that drives down demand. With low demand, companies will sell fewer goods/services. Lower sales means staff reductions. Staff reductions means less money to spend, leading to more delayed purchases. It is a death spiral for any economy.
No. Deflation is terrible for an economy. So much so that we tolerate a touch of inflation if for no other reason than to ensure deflation doesn’t happen.
In deflationary periods, money gets more valuable just sitting in a coffee can doing nothing. This may _seem_ good initially, but this means:
– Any debts you have get _more_ expensive over time, since the amount of the debt stays the same, but your income (likey) decreases to account for deflation. Servicing debt takes a higher percentage of your income.
– There is less incentive to invest, making it more expensive to take out loans or start businesses. This means fewer people are able to afford college, afford a home, buy a car, take a risk, etc.
– Consumption and purchase are delayed as long as possible. If something is $100 today and $90 next month, you are best served by waiting until next month to buy it.
That last one is **really, really bad**. If you delay purchases, that drives down demand. With low demand, companies will sell fewer goods/services. Lower sales means staff reductions. Staff reductions means less money to spend, leading to more delayed purchases. It is a death spiral for any economy.
Deflation is really dangerous for an economy as is tends to result in a recession or even a depression. https://youtu.be/-dnKdCwCw8o
Slow deflation?
You mean, death spiraling deflation. Modern economix tools (namely interest rates and money policy) do T work in deflation, because you can’t lower interest rates below zero. While if expectations are for lower prices in the future, consumers, who in the US at 75% of growth, delay purchases on hopes of lower prices. Selling goods and services at lower prices means slowing or stopping production. Meaning layoffs / firing. So, wages for some consumers goes to zero, too. And repeat.
Some inflation, 2-4% is always preferred because things are growing, progress is happening and wages rise along with prices
Slow deflation?
You mean, death spiraling deflation. Modern economix tools (namely interest rates and money policy) do T work in deflation, because you can’t lower interest rates below zero. While if expectations are for lower prices in the future, consumers, who in the US at 75% of growth, delay purchases on hopes of lower prices. Selling goods and services at lower prices means slowing or stopping production. Meaning layoffs / firing. So, wages for some consumers goes to zero, too. And repeat.
Some inflation, 2-4% is always preferred because things are growing, progress is happening and wages rise along with prices
Deflation is a worse outcome to the point where inflation might be artificially raised ot ensure it doesnt happen.
Deflation would mean that people would be encouraged ot sit on their money and have it do nothing inhopes it raises in value and just refrain from spending.
this is REALLY BAD long term because it will cause the economy ot stall while also making any debt that is active worse for the debtors. if left unresolved this lead to a recession and eventually a major depression.
Deflation is really dangerous for an economy as is tends to result in a recession or even a depression. https://youtu.be/-dnKdCwCw8o
Deflation is really dangerous for an economy as is tends to result in a recession or even a depression. https://youtu.be/-dnKdCwCw8o
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