It’s both at the same time really because it’s a feedback loop. Something causes deflation to start, suddenly it’s cheaper to buy something tomorrow instead of today (infinitely until deflation ends), people wait to buy things, demand for goods dries up rapidly, businesses fire people because there’s much less demand, unemployed people don’t buy as much, demand lowers further causing more deflation because supply is still backed up, etc etc. in a deepening spiral. We got out of it in the Great Depression with a combo of the WPA, New Deal, and WW2 spending.
It’s good for you only until the lowering prices causes your employer to fire you to cut costs or because they don’t need you to perform your job because demand has dropped. Deflation spirals include lots of people losing their jobs because businesses lose demand because goods will be cheaper if you wait to buy them.
I'm no economist and really don't know much, but it seems like much of our inflation is artificial anyway. Prices seem bloated not because people can afford to spend more, but because they are forced to. Corporations are making record profits while wages have barely increased. At some point, I think that trend will fail and things will balance out. Maybe that's what you're seeing as deflation. People will stop spending money on unnecessary things that cost more and the rest of the economy will follow. It's just a latent process because prices can increase at any time, but it takes time for people to realize they're not willing to spend that anymore or find other options. Like I said, I'm not an economist and not here to argue, so I'd like to know why someone thinks that's wrong.
The vibes and fact that our inflationary environment is bad for consumers in different ways doesn't really change that deflation tends towards self reinforcement. The economy is based on a certain level of continuous self feeding growth and more of that growth has been captured by companies in the form of record profits but it's not related to the fact that a true contraction causing deflation is also bad.
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u/CosgraveSilkweaver 5h ago edited 5h ago
It’s both at the same time really because it’s a feedback loop. Something causes deflation to start, suddenly it’s cheaper to buy something tomorrow instead of today (infinitely until deflation ends), people wait to buy things, demand for goods dries up rapidly, businesses fire people because there’s much less demand, unemployed people don’t buy as much, demand lowers further causing more deflation because supply is still backed up, etc etc. in a deepening spiral. We got out of it in the Great Depression with a combo of the WPA, New Deal, and WW2 spending.
It’s good for you only until the lowering prices causes your employer to fire you to cut costs or because they don’t need you to perform your job because demand has dropped. Deflation spirals include lots of people losing their jobs because businesses lose demand because goods will be cheaper if you wait to buy them.