(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
For money to work you need it moving (people using it).
The threat of money losing value (inflation) makes you do something with it. Buy things you want, or invest your money (allowing other people to use it).
If everyone thinks money increases in value over time, money stops moving. Because you would use as little as possible in an attempt to hoard as much as you can.
This would mean no incentive for competition. No incentive to start a business. No incentive to invest.
It would be a feedback loop that quicky implodes and destroys money and our way of life.
Latest Answers