Wouldn't that mean that the long term effects after deflation are better for quality of life though? Cost of living goes down, which results in people being able to live more comfortably on the same wages. Sure, the economy isn't growing but it doesn't sound that bad to me
Yes and no. On the one hand, putting off buying things as a consumer is good for personal wealth, but it also means the economy stagnates. Why would a company invest in making their products better if no one is buying the current models and they aren’t making money? Heck, why are they paying 100 workers when they only need 50 to make their demands? Then people get laid off because no one is spending. This can then lead to a rush of people buying the things they put off because they no longer have income, reversing things and causing inflation again, but now there are 50 people from that company without jobs who are getting pummeled by the increased prices. It dan, in theory, cause a cycle of this that leads to a lot of people being left holding the bag
353
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.