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?
In a deflationary economy things that are not assets are cheaper every day, so if you have to buy for example food it will be cheaper tomorrow, so you are wasting money by buying things that are not assets(homes/land), and it crates the economy because people start holding onto money because anythign they wished to buy will be cheaper tomorrow, and then the day after and so on. They will spend absolute bare minimum to survive in hope of reaching a "price floor", which never comes, and economy literally grinds to a halt.
This is why crypto can never be a currency for the masses, due to its deflationary nature(esp in cases like bitcoin) it punishes spending.
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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?