Generally because it becomes a mass psychological issue. The issue of deflation entrenching itself is that you dont spend that 500$. You stick in under your pillow because it'll buy you more next week. But then, next week, it'll buy you even more stuff next month and even more next year.
This assumes that the folks getting this money can afford to sit on it, and don't have immediate needs that they need to use it on. I can see why Elon would stop spending (though I don't think he's got a lot of cash laying around) but your average family putting groceries on credit cards can't afford to sit on a windfall because it'll be worth more later. They HAVE to spend it because they need food/gas/medicine now.
I think people are confusing macro scale economics with household scale. People will still have to spend on necessities. The real problem becomes the macro scale things that happen when money stops moving. Borrowing money becomes riskier and more expensive over time. When you think about how money actually moves through our economy it really looks like a bunch of IOUs being passed around, but this lending and borrowing happens because sitting on the cash is not as wise as investing it in something that will be worth more than the cash itself. In a deflationary environment, real goods and services are going to be worth less over time. When runaway deflation hits we're talking about prices of goods falling 10's to 20's of percent, there is almost no investment that can beat the fact that your cash buying power is increasing 10-20% just by literally sitting on it. This will change your spending habits on everything that isn't a necessity. Which will feed back into business decisions which will feed back into wages and jobs and will feed back into your life and decisions.
It feels to me similar to the goldilocks zone of planet habitability. There is a goldilocks zone of monetary policy that keeps an economy moving forward. Any deviation outside of it and things can and will spiral out of control due to negative feedback loops just like if earth moved out of the goldilocks zone of the sun. The negative feedback loops would eventually render this planet inhospitable for life as we know it
If the folks investing money were investing in real growth then I don't think it would as big of an issue as it is. They're investing in AI and data centers, not manufacturing or agriculture. Teslas valuation vs Toyotas is a clear indication of how broken things are in our current economy.
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u/AI_abuser 8h ago
Explain to me please why printing more money and giving it to people an masse (like stimulus checks during Covid) wouldn't help deflation.