Deflation is the opposite of inflation. Essentially, the market value of golds and services decreases as time goes on. For example, with 2% deflation, a loaf of bread that would cost 1€ will cost 0.98€ next year, ~0.96€ the next, and so on.
This is not ideal, because consumers will expect prices to continue to drop - and they actually will. This leads to less people spending money, which will in turn reduce demand, which will reduces prices further, which will increase deflation which will... You get it. Modern economies only work as long as money circulates, and deflation has a chilling effect on that, ultimately leading to a weaker and weaker economy. Deflation is hard to control, since you can't exactly convince people to start buying more things for higher prices. Anyway this is slightly outside my area of expertise. Google Japan Deflation for more info.
742
u/nebileyim_ben 8h ago edited 8h ago
its japans economic trap, worse than inflation.