r/PeterExplainsTheJoke • u/Melodic_Judge_129 • 9h ago

Meme needing explanation Petah?

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u/Grouchy_Theme1461 9h ago

bruh u gotta explain it

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u/nebileyim_ben 9h ago

its deflation, prices keep falling over time.

japan experienced long periods of deflation which is hurt spending and as a result affected economic growth.

its super hard to fix that bcs of liquidity trap.

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u/Terpcheeserosin 8h ago

Why does things costing less make people buy less?

If wages stay the same, shouldnt people just buy the dip?

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u/-DoctorEngineer- 8h ago

The real reason is that most spending done by anyone is done by investing. Most people aren’t putting a cash offer on a house they are going to their local bank and pulling out a loan from the communities money to pay for it and paying the community back with interest.

In deflationary states this whole system breaks down and the world is much less liquid.

There is a limit though, 2% yearly inflation is good, if this number gets too high the borrower loses desire to actually pay back the loan and the economy starts to fall apart in the other direction