Nobody is going to give hungry because food will be cheaper next year. Nobody is going to go homeless because rents will be cheaper next year. Even if doing nothing is a good strategy, humans aren't going to do nothing because our time on earth is finite and we hate saving.
Even in an inflationary environment the rational thing is not to consume, but to invest in investments where the expected return beets inflation.
From the perspective of the wealth (who account for most consumption) we have effectively been in a deflationary environment as their investment returns consistently beat inflation
The assumption that you don't have a job is the issue. We have seen deflation that is not accompanied with a recession multiple times. Japan is probably the best example.
We have evidence that recessions are followed by deflation. We don't have evidence of the inverse. It is intellectually lazy to conclude that deflations causes recessions. That same logic could be used to argue that medical tests increases rate of infection, or that homelessness results in high property prices
Is Japan an example of an economy that’s not in a consistent recession? Because I’d have to disagree with that. Their economy has been quite bad with significantly worse GDP growth than most other developed countries.
What evidence is there that recessions are always followed by deflation? There hasn’t been deflation in the USA since 1960.
There hasn’t been deflation in the USA since 1960.
That's just false. We saw deflation in 2007/2008 before the money printers were turned out. And some quarters since dipped into deflation as well.
Also low GDP growth ≠ negative GDP growth
And more importantly the GPD growth the US has seen following it's money printing to avoid recession has resulted in falling median living standard, hence the K shaped recovery. No evidence that this has been better for the average American than deflation.
Japan on the other hand despite low GDP growth has seen improved QoL because deflation means their stagnant wages affords them more amenities, ESPECIALLY amongst consumer staples.
US consumer staples go up in price, consumer descritionary goes down. That's a far worse trade off, especially when compared to median wages
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u/OpenRole 7h ago
Nobody is going to give hungry because food will be cheaper next year. Nobody is going to go homeless because rents will be cheaper next year. Even if doing nothing is a good strategy, humans aren't going to do nothing because our time on earth is finite and we hate saving.
Even in an inflationary environment the rational thing is not to consume, but to invest in investments where the expected return beets inflation.
From the perspective of the wealth (who account for most consumption) we have effectively been in a deflationary environment as their investment returns consistently beat inflation