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?
The economic tool would be to pay people fair wages in the first place. Theoretically, according to the people who control the economy, increasing wages is what causes inflation, right? So if you increase wages, that should cause inflation, which would curb deflation, right?
in a deflationary situation consumption would be low so companies wouldnt have revenue to increase wages.
also increasing wages increasing spending and thus inflation when we already have inflation, becuase there no use keeping your money safe since it'll jsut lose value
the problem with being in deflation is that its a pit thats hard to out of. even if you give people more money, they will hoard it because the money will increase in value over time but things they buy wont. consumption will be restricted to neccesities
the reason we need some inflation is so the money loses value faster than things so people buy things which moves money around faster so people have more mobility and flexibility and mobility in creating value. deflation stops the money cycle dead and starting up from cold again is hard
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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?