(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
Imagine if your student loan payments or mortgage kept rising as interest compounded, but your income was adjusted downwards for cost of living adjustment each year. With deflation, you have a shrinking supply of dollars. Each dollar buys more goods, but there is less to go around.
In deflation, people with debt lose HARD, and debt issuers win big.
With inflation, people that loan money lose out a bit, while borrowers/people that have long term debt tend to outgrow their obligations over a long time frame.
It’s not that inflation is good or bad. It’s about STABILITY. You just want your money supply and cost of goods to move generally in line with the growth of the economy. A moderate, controlled inflation supports a growing economy and facilitates growth and economic development, while deflation makes debt very punishing, and stifles growth.
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