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?
As far as I know deflation also means that debt is more expensive every year. Inflation can help to face up debt because every year your debt is worthless. But with deflation on each period you have to put more effort to pay your debt.
This is not really true, in all countries where inflation is high enough to have a relevant monetary impact financing is either given by adjusted rates, foreing currency or extremely high rates (150% NAR on a country with 50% inflation, for example). Many financial institutions have survived on countries that lived through hyperinflation through many of these strategies. The only way it could work the way you mentioned is if a country experienced overnight inflation, in that case sure, but there's a ton more issues that would show up in that case.
Hell, even entire sectors are adjusted monthly by an official public index (in Argentina, we have CAC, an official index to update both the cost of construction and price of real state, even for sales already done).
Yeah but I'm talking about countries with moderate inflation or countries that print money to pay debt and consequentially have inflation if they don't have a sort of backing to prevent inflation.
But for a country with a healthy economy having inflation with time makes a debt more manageable.
But as I said "As far as I know" I'm not economist and I'm far from it. So this is a comment in a random reddit sub.
Y honestamente el caso de argentina es más bien la excepción cuando se habla de inflación y deuda. No como algo malo si no que hay pocos casos que repliquen el modelo argentino y la mayoría de conclusiones sobre deflación se hacen sobre países que no sufren de hiperinflación.
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u/StuartMcNight 9h 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?