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Wages are sticky but jobs aren't. Hyperinflation kills banks, because the loans devalue so fast they are worth nothing when they are repaid. Deflation in smal
by biohacker42 18y ago
Wages are sticky but jobs aren't.
Hyperinflation kills banks, because the loans devalue so fast they are worth nothing when they are repaid.
Deflation in small amounts can be good for savers, but high and sustained deflation kills all borrowers.
That includes short term financing businesses need to pay salaries while sales are still being made and profits are still coming in.
Overall it leads to everyone hoarding cash and not spending and that just murders the economy.
- Prrometheus 18y agoSharp deflation, like during the Great Depression, is bad as you say. Slow deflation, like the period after resumption, is not bad. In reality, the economy is quite capable of coping with any mild change in prices, and quite bad at dealing with sharp changes in price. It doesn't particularly matter whether those changes are up or down.