1) If I can expect the price of a pair of shoes to drop if I wait, I’ll wait as long as I can before buying it. The shoe company is going to lose sales and fire workers and the government is going to miss out on taxes (both on the sale and on the now-unpaid salaries).
2) Most governments are deeply in debt. Imagine a fictional country has a debt of 1000 € and today you can buy a loaf of bread for 2 €. The “value” of the debt is 500 loaves of bread. Imagine due to deflation, the price of a loaf drops to 1 €. The value of the debt has gone up to 1000 loaves of bread.
The shoes are still being bought. They just have better value for the customer than the company in this. The threat of firing workers only goes so far when they fire people anyways and will always need workers. Its not a company if they fire 100% of the workers.
If the debt was being paid back exclusively in loafs of bread this would be bad. But it just shows that in the long run it becomes easier to pay it back because more of the money is able to be put towards the debt
In steps:
1) people are happy to wait to buy something if they think they don't need it right now. An example of this is when people say "I'll wait until the summer sale to buy this".
2) when you have a low level of deflation, you know things will be cheaper in the future
3) therefore you put off discretionary purchases
4) this hurts the company that makes the thing you would have purchased
5) because they have less demand for their products
6) because they have less demand, they make less
7) because they aren't making as many products, they don't need as many workers so they lay them off
8) uh oh, it turns out that you're not just a consumer, you're also a worker
9) now you are unemployed so you decrease your discretionary purchases even more
10) repeat
11) you are now in a deflationary spiral
I've got no clue what you're trying to say with your second point. Bread becoming cheaper isn't a problem. You can have some prices for some goods decreasing in your economy, it's actually very normal. It's especially not a problem if those products are things you need and consume, like food. You don't really defer your food purchases for a meaningful amount of time. If you have it overall, then you get an issue of deflationary spiral.
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u/thevoidthatjerksback 9h ago
I doubt that anyone could explain this in a way where I would accept deflation as worse