Low inflation might be the first step towards deflation. Many economists would argue that deflation is a worse situation for the economy because it leads to a sharp drop of consumption and therefore a huge recession follows?
They way it was explained to me is that a little bit of inflation is a good thing. Theoretically workers should get raises Based on the inflation rate one of the reasons things are so bad right now is that that isn’t happening but I digress. If your money is worth more then people will be layed off
Companies can't function with zero employees. A system that requires annual raises by choice doesn't seem optimal. It seems like a way to subtly control and manipulate who gets more or less out of those raises
Yes, the issue is wages for working class people not keeping up with inflation.
However, it is still the case that ~2% is considered optimal by most national economic control bodies like the Federal Reserve.
Deflation is dangerous because it puts the economy at risk of recession. Japan has actually been battling against deflation desperately for years now, and is struggling quite a bit. They were the first state in history to apply a negative interest rate on loans, trying to stop it.
Companies can't function with a loss either. So as often happens with deflation, they just stop existing because as you correctly pointed out they can't function with 0 employees but nor can they pay more. So a huge loss of jobs happens accross the economy
Notice the phrase theoretically in my statement. Also note I said that one of the issues in the current economy is this isn’t happening. I guess I should have prefaced it ceteris paribus as I was speaking from an ideal lens. Still there a concerning subset of people on this site that don’t understand that a good economy for all my not look like what they think it does. It is not merely “goods cheap wage high” though I admit that’s good for people. A the economy is a meany headed hydra.
Being more hyperbolic I know why and I think it was less the historical aspect and more for this sort of situation.
Ie haves us be economically literate so we can make better financial decisions.
Now a class I really don’t know why my advisor had me take was my bio class. I wasn’t in a regular bio class I was in one for med students and other science majors. I’ll admit the major difference was it just covered more things in depth but still that was hard for me and I never understood why my advisor didn’t put me in the regular bio class
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u/StuartMcNight 8h ago
Low inflation might be the first step towards deflation. Many economists would argue that deflation is a worse situation for the economy because it leads to a sharp drop of consumption and therefore a huge recession follows?