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Deflation is not something desireable in macroeconomics. It incentivizes hoarding cash instead of spending it on productive things (hiring people, capital inves
by auxym 5y ago
Deflation is not something desireable in macroeconomics. It incentivizes hoarding cash instead of spending it on productive things (hiring people, capital investments to improve productivity, etc).
Slow and steady inflation is a stated goal for most governments and central banks.
- Geee 5y agoNah. When things are cheap, people will go shopping. When things are expensive, people will save. It's a naturally self-correcting mechanism. Every deviation from the expected deflation would be an opportunity for arbitrage. Also, the deflation isn't guaranteed, so it carries a risk, which disincentivizes hoarding.
- ineedasername 5y agoThere are always some things that are expensive and some that are cheap. It is not a binary mode for many people to be in one or the other.
- Geee 5y agoPeople usually buy more when products are on sale.
- rawtxapp 5y agoIf that "productive thing" isn't productive enough to yield better than an asset that just sits there in a cold storage, I would argue it wasn't all that productive and/or efficient to begin with. People will always spend for things they need, they'll also spend it for things they want, but the current fiat system is forcing to spend it just for the sake of spending it forcing over/pointless consumerism on everyone.
- landemva 5y agoDeflation means I can buy more stuff for less money. This allows me to work less and have more leisure time. Therefore, deflation is desirable.
- foepys 5y agoSo everybody stops working after saving a few years. And then who produces the food?
- landemva 5y agoDo you want everyone to go back to the farms as laborers? Our food abundance is produced mechanically. Automation and technology brings deflation, which allows me and my children to not toil in the fields. It appears some here believe in the labor theory of value. For me, if I cant do better than the machine, then I am not adding value and need to do something else.
- ineedasername 5y agoAutomation doest not bring deflation. It brings a higher standard of living where people have more money so they can buy more things. Prices still increase though-- inflation. The key is to have wage increases, and therefore quality of life, increase at a rate that at least slightly exceeds inflation so that people continuously have increasing amounts of money to improve quality of life. This is why wage stagnation or when wages do not keep pace with inflation it's bad.
- lottin 5y agoApparently you don't understand deflation? Deflation means the price level falls over time, including salaries.
- acdha 5y agoOkay, try how it’d actually work: … then your boss says sales are down and your salary is being cut. “Don’t worry, your purchasing power hasn’t changed!” … then you need to go to each creditor and try to renegotiate your balance so you’re not overpaying at the current value rather than what it was when you bought your house or car. … meanwhile the economy slowly grinds to a halt as people and businesses hesitate to get loans for the same reason. That’s when the layoffs start ramping up, which does not improve the state of the economy. This used to happen periodically and it was ruinous — it’s why systems like the Federal Reserve were created and almost all serious economists target consistent low inflation levels since that has the opposite effect of incentivizing economic activity.
- NaturalPhallacy 5y ago>Slow and steady inflation is a stated goal for most governments and central banks. Because they like controlling their people, keeping them poor, and robbing the value they create. Authoritarianism is tyranny by another name.
- ineedasername 5y agoSlow and steady inflation in the US has resulted in economic growth leading to some of the highest quality of life increases in the last century. A poor person today nonetheless has a higher quality if life than a poor person 100 years ago.