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I think you have to put every scenario in context with what came before. Yes, traditionally, widespread deflation can sometimes lead to recession. But when the

I think you have to put every scenario in context with what came before. Yes, traditionally, widespread deflation can sometimes lead to recession. But when the economy has been running overheated for years, it's more of a correction to cool things off. If you're driving at 120 mph and tap the brakes, that's different than driving the speed limit and braking, the latter is much more likely to cause a traffic jam.

thinkharderdev 4y ago
We've been below the target inflation rate for 15 years. We haven't had CPI consistently above 2% in the US since the 1980s. I don't see how this can be a "correction"
- listenallyall 4y ago
  The 15-year average temperature of a building could easily be within a normal, safe range, but if it is currently on fire, the past 15 years don't really matter, do they?
  - thinkharderdev 4y ago
    1. The inflation situation is not "on fire." It's bad for sure but let's not catastrophize here. 2. If a building is on fire, the goal is not to make the building a meat locker for a few months/years to "compensate" for the fire. The goal is to put the fire out and return to a normal temperature.
    - listenallyall 4y ago
      > the goal is not to make the building a meat locker Well, you do put out fires with a CO2 file extinguisher blasting at 50 or 60 below zero. > let's not catastrophize here. Minus 2 percent inflation would be closer to the "Fed target" than the recent 7-8% we have been experiencing. The idea that many of you are trying to push, that deflation of any kind is a guaranteed financial disaster, that's the hyperbole that ought to be suppressed.
twixfel 4y ago
Any evidence for your claim that deflation following a period of inflation has fewer (or none) of the harms associated with deflation? Any reason to believe that central bankers are in a good position to fine tune to get just the right amount of deflation and not overdo it, given that they already struggle with the same for inflation? Any reason to believe that the dynamics of a car diving in a line are comparable to the dynamics of the global economy? I don't understand the magical thinking often demonstrated in these threads. Just because it sounds plausible, that doesn't necessarily mean its true.
- listenallyall 4y ago
  If you're waiting for undisputable hard evidence of any macroeconomic theory, you'll be waiting a long time. The global economy is constantly changing and evolving and nations interact and trade in different ways over time. I have no faith in central banks to engineer a perfect landing, that's not the argument, it's simply that the concept of "deflation = bad" is not necessarily a universal truth.
  - twixfel 4y ago
    So you have no evidence or reasoning whatsoever, just an analogy involving a car and vibes. That macroeconomics is difficult is no reason to just start doing random shit. I'm not asking for "indisputable hard evidence", but definitely something more than ~vibes~.
    - listenallyall 4y ago
      I just gave you the reasoning. Coming off a "normal" economic period, deflation might have the negative effects everyone is claiming. (Might. I'll leave all the evidence gathering to those claiming it's so awful). But we aren't in normal economic times. We're coming off (or, at 7+%, still experiencing) a period of ultra-high inflation (for the US) where prices seem to be rising out of control, where credit card debt is increasing rapidly. If prices were to fall, say 2% in 2023, I think that would be preferable for almost every consumer than prices continuing to rise even further. And the idea that the economy would grind to a halt and sink into recession as people delay purchases hoping for another 1% drop in prices, is pretty absurd.
jjk166 4y ago
Conversely, if someone is tailgating you then tapping the breaks at 120 mph is much more dangerous than at low speeds, as they have less time to react. Likewise the sudden shock of going straight from inflation to deflation could be much worse than deflation after a long period of stagnancy, as not only do you suffer all the issues of deflation but you also have the delayed response of things adapting to the inflation.
- listenallyall 4y ago
  Who is the tailgater in this scenario?
  - jjk166 4y ago
    The various entities in the economy who need to react to changes in the money supply - businesses, banks, consumers, governments, etc.

thinkharderdev 4y ago

We've been below the target inflation rate for 15 years. We haven't had CPI consistently above 2% in the US since the 1980s. I don't see how this can be a "correction"

listenallyall 4y ago
The 15-year average temperature of a building could easily be within a normal, safe range, but if it is currently on fire, the past 15 years don't really matter, do they?
- thinkharderdev 4y ago
  1. The inflation situation is not "on fire." It's bad for sure but let's not catastrophize here. 2. If a building is on fire, the goal is not to make the building a meat locker for a few months/years to "compensate" for the fire. The goal is to put the fire out and return to a normal temperature.
  - listenallyall 4y ago
    > the goal is not to make the building a meat locker Well, you do put out fires with a CO2 file extinguisher blasting at 50 or 60 below zero. > let's not catastrophize here. Minus 2 percent inflation would be closer to the "Fed target" than the recent 7-8% we have been experiencing. The idea that many of you are trying to push, that deflation of any kind is a guaranteed financial disaster, that's the hyperbole that ought to be suppressed.

twixfel 4y ago

Any evidence for your claim that deflation following a period of inflation has fewer (or none) of the harms associated with deflation? Any reason to believe that central bankers are in a good position to fine tune to get just the right amount of deflation and not overdo it, given that they already struggle with the same for inflation? Any reason to believe that the dynamics of a car diving in a line are comparable to the dynamics of the global economy? I don't understand the magical thinking often demonstrated in these threads. Just because it sounds plausible, that doesn't necessarily mean its true.

listenallyall 4y ago
If you're waiting for undisputable hard evidence of any macroeconomic theory, you'll be waiting a long time. The global economy is constantly changing and evolving and nations interact and trade in different ways over time. I have no faith in central banks to engineer a perfect landing, that's not the argument, it's simply that the concept of "deflation = bad" is not necessarily a universal truth.
- twixfel 4y ago
  So you have no evidence or reasoning whatsoever, just an analogy involving a car and vibes. That macroeconomics is difficult is no reason to just start doing random shit. I'm not asking for "indisputable hard evidence", but definitely something more than ~vibes~.
  - listenallyall 4y ago
    I just gave you the reasoning. Coming off a "normal" economic period, deflation might have the negative effects everyone is claiming. (Might. I'll leave all the evidence gathering to those claiming it's so awful). But we aren't in normal economic times. We're coming off (or, at 7+%, still experiencing) a period of ultra-high inflation (for the US) where prices seem to be rising out of control, where credit card debt is increasing rapidly. If prices were to fall, say 2% in 2023, I think that would be preferable for almost every consumer than prices continuing to rise even further. And the idea that the economy would grind to a halt and sink into recession as people delay purchases hoping for another 1% drop in prices, is pretty absurd.

jjk166 4y ago

Conversely, if someone is tailgating you then tapping the breaks at 120 mph is much more dangerous than at low speeds, as they have less time to react. Likewise the sudden shock of going straight from inflation to deflation could be much worse than deflation after a long period of stagnancy, as not only do you suffer all the issues of deflation but you also have the delayed response of things adapting to the inflation.

listenallyall 4y ago
Who is the tailgater in this scenario?
- jjk166 4y ago
  The various entities in the economy who need to react to changes in the money supply - businesses, banks, consumers, governments, etc.