Why is an economic depression bad for consumers even though prices are cheaper?
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Because peices are not usually cheaper in a depression, at least not at first. A depression is usually preceded by rampant inflation. So though prices may come down, they are already highly inflated and items cannot be afforded in the first place.
Most comments here already give the reasons why
So hence usually middle income and high income earners are only able to benefit from an economic depression (due to strong savings and less likely to be laid off)
That is only if they behave in a contrarian manner (for example, spend more during a recession and save and invest during a strong economy)
In the GFC, stock valuations and the housing market crashed. Mortgages went underwater.
But meanwhile you also hear stories of people being able to finally afford to buy a home thanks to the GFC, having waited for a deep housing market crash or correction.
Think of it like a car. When a car is on, it uses gas to move. The miles per gallon might be good or bad, but wouldn’t your miles per gallon be infinite if your car was off? Or if you didn’t have gas in the car? No.
An economy needs money to move (gas). When it runs out of “gas”, prices go down, but now, your car (the economy) doesn’t have any fuel to keep it moving.
Because consumers usualy also are people from the working class, and economic depression and the loss of jobs which follows isn’t kind on people from the working class.
If you can keep your job and your wage, you’ll be fine though.
It’s not the price decrease that is bad for consumers.
Price decrease means lower profit for company.
Lower company profit translates to layoffs of employees.
Ceasing to be an employee dramatically reduces your available funds.
When you don’t have available funds, you become a very poor consumer.
In addition a sense that the depression could extend causes both consumers and companies to cut back spending which exacerbates the above. In a depression, consumer confidence is harder to bolster than it is to shake, but the only way out is to get more money flowing again.
A rising tide raises all boats
A stormy ocean sinks the little boats so the big ones can salvage
A depression is bad because prices are down, but income is also down, and usually income is down unequally. Some people get laid off and some people don’t. The people who do need to have a buffer or they can lose what they worked for. Savings. A home. Health insurance (bad time to get sick).
It wouldn’t be as bad but the safety net in the US is pretty garbage. There is rarely enough support to prevent catastrophic loss.
The reason prices are cheap is because no one is buying, so companies producing arent making money so the dont have money to pay employees so the employees get laid off so they dont have money to buy anything
An economic depression is bad for consumers because it leads to widespread unemployment and financial insecurity. Even though prices may be cheaper, many people lose their jobs, making it difficult to afford even basic necessities. The lack of stable income creates uncertainty and stress, impacting people’s overall well-being and ability to meet their essential needs.
Cheap goods and services are great unless you have a job in the “making goods” industry, or the “providing services” industry. For those people, it’s bad. Most people are those people.
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