(I’m American) Inflation is the rising cost of goods and services. Inflation constantly goes up by varying degrees. When economists say “inflation is decreasing”, that just means that the rate of inflation has slowed, not that inflation reversed.
If inflation is causing money to be less valuable over time, why would it be bad to have deflation? Would that not make my money more valuable? I’ve been told it would be very bad, but not in a way that I understand
In: Economics
– **Everyone is incentivized to sit on their money.** The value of your money going up means you want to hoarde it and not spend. You want savings. But money in the bank doesn’t actually do the economy any good. It’s the exchange of money which is the economy.
– **Loans get harder to pay off**. It’s a sneaky extra added interest rate. People will have a harder time paying off loans so banks have to be more careful about who they loan to. ALSO, as mentioned, it’s better to sit on your money, so banks wouldn’t want to loan out money unless it had an even bigger interest rate. (Although, same goes for when there’s high inflation).
– **Wages go down**. In the a exact way that [wages have gone up with inflation](https://www.piie.com/research/piie-charts/us-wages-lowest-earners-are-growing-fastest-rate-global-financial-crisis), once money is worth more companies are REAL quick to cut wages.
oh man, some nutcase on here were recently pushing some of the most ridiculous propaganda that deflation was a good thing. But they were crazy liberatarian gold-standard advocates that just really hate the Fed and fiat currency. Crypto-bros, ugh.
Latest Answers