3 ms·

Deflation doesn't mean cheaper food and shelter. Remember, deflation reduces the dollar value of labor, too. But the dollar-value of all other goods and service

Deflation doesn't mean cheaper food and shelter. Remember, deflation reduces the dollar value of labor, too. But the dollar-value of all other goods and services decreased tenfold as well so in the end nothing has changed. However, there's one big factor you're missing: debt. Simply put, inflation favors debtors while inflation favors creditors. Imagine you bought your house with bitcoin, and took out a mortgage of 500 bitcoins to pay for said house, back when bitcoin was $500. Total debt, $250k. Now, the price of bitcoin is over $6,000. Did your loan magically shrink from 500 bitcoin to ~42 bitcoin? No, your loan is still 500 bitcoin. So your $250k mortgage has become a $3 million mortgage. So inflation hurts people that loan out more money than they owe: mostly banks and rich people. Deflation hurts people that owe more money than the loan out: poor and middle class people. Benefiting the wealthy at the expense of the poor is broadly considered to be immoral. An ideal world might see zero inflation and zero deflation, but predictions are always off so the Fed plays it safe and targets ~2% inflation.

ShorsHammer 8y ago
> Deflation doesn't mean cheaper food and shelter. It's the literal definition of it. https://seekingalpha.com/article/4085479-food-deflation-hurts-grocery-industry https://seekingalpha.com/article/4085479-food-deflation-hurt... > So inflation hurts people that loan out more money than they owe: mostly banks and rich people. General controlled inflation doesn't hurt banks at all, they simply put their margin on top and that's the interest rate. In fact people are far more likely to use their services in a high inflationary environment. "Rich people" and large corporations are far more indebted than the average person, they disproportionally benefit compared to a simple wage earner purchasing a house or running a small business. Also the headline inflation rate and individual sectors are two entirely different beasts. If wage inflation moves nowhere but overall inflation goes up it's absurd to claim this benefits the poor and workers. It only encourages more people to borrow and speculate on assets in a feedback loop. Inflation is not some magical gift from the financial heavens bestowed upon the masses to balance out society, in fact it's the opposite.

ShorsHammer 8y ago

> Deflation doesn't mean cheaper food and shelter. It's the literal definition of it. https://seekingalpha.com/article/4085479-food-deflation-hurts-grocery-industry https://seekingalpha.com/article/4085479-food-deflation-hurt... > So inflation hurts people that loan out more money than they owe: mostly banks and rich people. General controlled inflation doesn't hurt banks at all, they simply put their margin on top and that's the interest rate. In fact people are far more likely to use their services in a high inflationary environment. "Rich people" and large corporations are far more indebted than the average person, they disproportionally benefit compared to a simple wage earner purchasing a house or running a small business. Also the headline inflation rate and individual sectors are two entirely different beasts. If wage inflation moves nowhere but overall inflation goes up it's absurd to claim this benefits the poor and workers. It only encourages more people to borrow and speculate on assets in a feedback loop. Inflation is not some magical gift from the financial heavens bestowed upon the masses to balance out society, in fact it's the opposite.