3 ms·

I don't know, but I do strongly believe that the "conventional wisdom" that deflation is a horrible phenomenon that leads to a decades-long depression is bullsh

by thworp 4y ago

I don't know, but I do strongly believe that the "conventional wisdom" that deflation is a horrible phenomenon that leads to a decades-long depression is bullshit. The entire process of industrialization was hugely deflationary Yet still the 1800s were the first time in history where quality of life for the average Joe improved by leaps and bounds. Diet, medicine, child mortality, wealth all started improving exponentially. Meanwhile under the monetary alchemists and "stabilizing" regime of central banks real wages have stagnated, crises still occur every 10 years and the entire system is so fragile that one major event could collapse the whole house of cards.

SgtBastard 4y ago
>The entire process of industrialization was hugely deflationary Prices definitely lowered, but the difference being that while there was also supplier upheaval as artisan/bespoke producers were replaced by mass production - the industrialists were enormously and sustainably profitable and could in turn employ those displaced from the failed producers. Aggregate demand arguably increased with the move of labour from rural agriculture to urban manufacturing. A deflationary cycle annihilates demand by definition and fixed costs then eat producers alive - leading to wealth destruction, unemployment, debt writeoffs and credit tightening. Which in turn leads to more demand annihilation.