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Yes, but this is easy to avoid. It's only happened when the governmental authorities foolishly believed they should respond to deflation with austerity, which i

Yes, but this is easy to avoid. It's only happened when the governmental authorities foolishly believed they should respond to deflation with austerity, which is now obvious to us that this is backwards. See https://en.m.wikipedia.org/wiki/Bernanke_doctrine https://en.m.wikipedia.org/wiki/Bernanke_doctrine That said, the fact that austerity has been tried recently suggests the perverse impulse to respond to deflation with belt tightening instead of expanding credit is still with us. But all we have to do is just print money to match the deflation. The 1990s through 2019 are a great example, there was constant economic deflation because of new technology and the fed just printed credit like crazy to match said deflation and keep the inflation at 2pct. The pie was getting bigger, so eroding the value of each slice to make it a smaller portion of the pie kept slice sizes stable while not making anyone lose pie. They had an easy time with that. Now that the pandemic caused real eocnomic inflation due to supply shocks, dealing with excess inflation is a lot harder. The only way to keep pie slice size stable is to take away pie from someone and nobody wants be the loser, so capital and labor are in a game of chicken to see who blinks first and has to eat more of the inflation.

lurking15 2y ago
> the fed just printed credit like crazy to match said deflation and keep the inflation at 2pct There's no rational basis for the 2pct inflation target [1], it's entirely baseless, in some sense it's now a matter of conservatism, mere tradition from a random fad decision in the 90s. And the point is that monetary expansion directs the energy of the economy and effectively steals savings, forcing the economic energy of people into consumerism and CEOs pockets. [1]: https://archive.ph/5abTC https://archive.ph/5abTC
- throw0101d 2y ago
  > There's no rational basis for the 2pct inflation target [1] […] Except that it seems to work. Hitting an inflation rate of exactly 0% is practically impossible: you're going to be either a little high, or a little low. So the option is: do you want "too high" or "too low" (negative)? In the last little while how we've all seen how painful high(er) inflation is for people. Lessons from periods of the 1930s (and others in the linked-to PDF) show how bad deflation is. A "little" high seems to have been a pretty good compromise.
  - lurking15 2y ago
    The 1930s show the consequences of inflation, speculation and credit expansion, and then bungled government response that dragged out economic contraction which is needed to clear out malinvestment. Any common person realizes their ability to lead a dignified life is being squeezed out by monetary expansion gone amok, with those closest to the govt spigot getting the benefits and none of the costs (cantillon effect). And it brings up a good point which no one answers satisfyingly: why shouldn't the average person just enjoy price savings produced by technology?
    - throw0101d 2y ago
      > The 1930s show the consequences of inflation, speculation and credit expansion […] The 1930s were nothing special when it comes to wild swings in prices (as the article show), speculation was not new (see canal mania, railroad mania, etc) * https://en.wikipedia.org/wiki/Canal_Mania https://en.wikipedia.org/wiki/Canal_Mania * https://en.wikipedia.org/wiki/Railway_Mania https://en.wikipedia.org/wiki/Railway_Mania What is special is the post-WW2 era (where there was no deflationary bust, especially after a major war), and the decades that followed (when there was no gold standard to handcuff monetary policy, and when Keynesian economics allowed for fiscal flexibility). > And it brings up a good point which no one answers satisfyingly: why shouldn't the average person just enjoy price savings produced by technology? There's a difference between deflation through innovation, and deflation through economic turmoil (e.g., mass unemployment, collapse of aggregate demand). One of my favourite examples of 'invisible deflation' that no one notices (often while they're complaining about inflation) is a 1991 Radio Shack ad: * https://www.huffpost.com/entry/radio-shack-ad_b_4612973 https://www.huffpost.com/entry/radio-shack-ad_b_4612973 * Via: https://awealthofcommonsense.com/2021/01/inflation-truthers/ https://awealthofcommonsense.com/2021/01/inflation-truthers/
      - lurking15 2y ago
        You realize Canal Mania & Railway Mania happened during eras where interest was artificially low below the historical rate of 7~8%?

lurking15 2y ago

> the fed just printed credit like crazy to match said deflation and keep the inflation at 2pct There's no rational basis for the 2pct inflation target [1], it's entirely baseless, in some sense it's now a matter of conservatism, mere tradition from a random fad decision in the 90s. And the point is that monetary expansion directs the energy of the economy and effectively steals savings, forcing the economic energy of people into consumerism and CEOs pockets. [1]: https://archive.ph/5abTC https://archive.ph/5abTC

throw0101d 2y ago
> There's no rational basis for the 2pct inflation target [1] […] Except that it seems to work. Hitting an inflation rate of exactly 0% is practically impossible: you're going to be either a little high, or a little low. So the option is: do you want "too high" or "too low" (negative)? In the last little while how we've all seen how painful high(er) inflation is for people. Lessons from periods of the 1930s (and others in the linked-to PDF) show how bad deflation is. A "little" high seems to have been a pretty good compromise.
- lurking15 2y ago
  The 1930s show the consequences of inflation, speculation and credit expansion, and then bungled government response that dragged out economic contraction which is needed to clear out malinvestment. Any common person realizes their ability to lead a dignified life is being squeezed out by monetary expansion gone amok, with those closest to the govt spigot getting the benefits and none of the costs (cantillon effect). And it brings up a good point which no one answers satisfyingly: why shouldn't the average person just enjoy price savings produced by technology?
  - throw0101d 2y ago
    > The 1930s show the consequences of inflation, speculation and credit expansion […] The 1930s were nothing special when it comes to wild swings in prices (as the article show), speculation was not new (see canal mania, railroad mania, etc) * https://en.wikipedia.org/wiki/Canal_Mania https://en.wikipedia.org/wiki/Canal_Mania * https://en.wikipedia.org/wiki/Railway_Mania https://en.wikipedia.org/wiki/Railway_Mania What is special is the post-WW2 era (where there was no deflationary bust, especially after a major war), and the decades that followed (when there was no gold standard to handcuff monetary policy, and when Keynesian economics allowed for fiscal flexibility). > And it brings up a good point which no one answers satisfyingly: why shouldn't the average person just enjoy price savings produced by technology? There's a difference between deflation through innovation, and deflation through economic turmoil (e.g., mass unemployment, collapse of aggregate demand). One of my favourite examples of 'invisible deflation' that no one notices (often while they're complaining about inflation) is a 1991 Radio Shack ad: * https://www.huffpost.com/entry/radio-shack-ad_b_4612973 https://www.huffpost.com/entry/radio-shack-ad_b_4612973 * Via: https://awealthofcommonsense.com/2021/01/inflation-truthers/ https://awealthofcommonsense.com/2021/01/inflation-truthers/
    - lurking15 2y ago
      You realize Canal Mania & Railway Mania happened during eras where interest was artificially low below the historical rate of 7~8%?