: Why would deflation be bad?

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(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

37 Answers

Anonymous 0 Comments

The economy and people struggling because their money loses value is less bad than people not spending money and collapsing the economy.
Inflation incentivices money spending because you want to get rid of the money as fast as you can before it loses to much effective value or buying power. This keeps the economy going. Deflation incentivizes hoarding your money because it will gain value by not spending it. The money that now doesn’t flow into the economy leads to cuts in workers and products. The workers out of a job now don’t have expendable wages and will try to ration their money as best as possible and even less money is flowing into the economy until no one is spending money aside from essentials and the market collapses.

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