How do you pay for anything if you don't have a job bud?
Deflation means all capital interests veer towards saving over spending, including corporate interests that would typically be spending money to make money by hiring people to do work.
How do you pay for anything if you don't have a job bud?
That's a cute way to call yourself proletariat. Wealthy people pay for things using the returns of their investments. If that were not possible, retirement as a concept would not exist.
Also deflation doesn't mean that. As long as the expected return of investment is > 1, the rational move is to still invest in a deflationary environment because the goal is to MAXIMISE returns. Otherwise everyone would just invest in bonds and call it a day under inflationary conditions
Nominal returns are highly dependent on inflation.
If inflation is 100% per year, I can do nearly anything to get a nominal return greater than 0%. 0% is the nominal return I am looking to beat, as that is what I get sitting on cash.
If inflation is -50% per year, I can do almost nothing to get a nominal return greater than 0%. So I don't do anything.
If I am paying an employee $50k a year, at the end of the year the real value of that wage is $100k. I don't think they're worth that. So I fire them, or reduce their pay.
A deflationary economy does not leave you alone. Prices don't drop while your income and employment remain untouched.
The biggest recent examples of deflation are the Great Recession in the US and the lost decades for Japan. It is not good.
Thats a counter example to your points. QoL improved for Japenese people during the lost decade due to inflation. Wages remained stagnant while prices fell, goods become cheaper.
Which shows that all else being equal, deflation has positive effects. Deflation can exist outside of a recession. Recessions are often proceeded by high levels of inflation.
90% of arguments against deflation are arguments against recessions with it assimed that deflation and recessions are the same.
What has been observed: recessions cause deflation
What has never been observed: deflation causes recessions
Perhaps the reason deflation follow recessions is because deflations are positive and so nations allow it when they are desperate to protect people during massive negative events such as recessions.
Perhaps the deflation is like supplements. People tend to consume more when they are sick. Doesn't mean they cause people to become sick
The economic theory you love to point to also claims that a low 2% unemployment is actually dangerously low.
Nonetheless we see rising unemployment in developed economies globally. What is your evidence that what we saw in Japan was specifically a result of deflation?
We also see a MASSIVE Labour force participation rate in Japan over that same period as more women entered the labour force. Job growth was strong. Labour participation simply outstripped it
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u/wazeltov 7h ago
How do you pay for anything if you don't have a job bud?
Deflation means all capital interests veer towards saving over spending, including corporate interests that would typically be spending money to make money by hiring people to do work.