Could I have some of that deflation
this post was submitted on 11 Dec 2023
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Deflation tends to trigger massive layoffs since revenue drops and investment becomes a worse option than saving.
Everyone always hopes that economic downturns will affect everyone but them specifically, but it really doesn't work that way.
Meanwhile we have inflation and layoffs.
Unemployment is essentially the same as it was before the pandemic, and is actually a bit lower than it was in the beginning of 2018.
Inflation is of course a problem. The point is that deflation is a much bigger problem. It's not as big an issue if you have plenty of savings to fall back on, which is to say, if you don't have savings to fall back on, you're fucked.
Unemployment is a shit metric when you can be starving, homeless, and employed. To those people, inflation is a life threatening squeeze.
Which countries do you think don't have homeless people, just out of curiosity? In the west, homelessness has almost nothing to do with actual economic factors.
It's is quite shocking how much people on the internet decry financial illiteracy, and the turn around and demonstrate financial illiteracy.
I concur!
Ah yes, 0.5% deflation will have people clamoring to save their money instead of investing. Following your logic, prices should just never ever drop.
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Can someone explain why falling prices are bad?
The article states: “Deflation is bad for the economy because consumers and companies may put off purchases or investments in anticipation of prices falling further. That in turn could further slow the economy, and create a vicious cycle.” China has a robust export business, let’s say you wanted a toaster to buy, you don’t need it you just want it, and this month it’s $12, but you remember seeing it for $15 last month and $21 the month before. So you wait and next month it’s $10. Now since you aren’t in a hurry to get this item why not wait and see how low it goes? Meanwhile Mr toaster salesman’s pulling his hair out because he can’t slash prices to get rid of this inventory fast enough. Or something like that. Now the Chinese government can do several things to go back into the inflation level, one of which is just print money. They also say in the article that they would rather see prices rise naturally and they believe that’s what will happen.
People don't work like that, otherwise sales would be the only time people buy things. The relationship in reality most likely the reverse: people put off purchases for other reasons (i.e. "the economy" isn't as rosy as economists' handpicked numbers claim) and people put off purchases because they can't afford it, so deflation follows.
True, but my example aside the economy isn’t an indicator of how a person reacts but how a populous reacts. Following and reacting to trends comes naturally to our brains.
Because if it moves too fast everyone holds their money anticipating it'll get even lower, leading to less revenue, leading to belt tightening, leading to people holding their money even more tightly because they lost their income, on and on in a vicious cycle.
A lot of the economy only exists because of the idea that people are going to buy more than they necessarily need, for a wide range of reasons of enjoyment or personal project or as gifts for family and friends, so if people stop doing that for whatever reason, economy no have good time.
It means you logically should save instead of spend Very easy death spiral when everyone is saving instead of spending.
Because business bought too much avocado toast and don't have any savings. Every market fluctuation means they have to adjust overhead. First overhead to adjust is almost always Operation expenses ie labor.
They oughta get a roommate!
It should be pointed out that the incentive for saving as opposed to spending also applies to businesses and labor, which means they'll slash jobs.
After all, why continue to pay you when the company can just wait half a year and then hire someone new for significantly less?
I doubt it's even bad, or at least not as bad as it's made out to be. People have already demonstrated that they aren't going to choose to lower their standard of living today in favor of tomorrow. Technology is already deflationary and people keep buying phones and computers and TV's even though those get better/faster/bigger/cheaper every year.