And deflation is great if you have a huge pile of money to live off of and don't care about general misery and decreased societal well-being.
But if you have a job, deflation very quickly leads to you losing it, as demand for goods and services shrinks, people are laid off, they can't buy stuff so demand for goods and services shrinks further, more people are laid off etc etc.
Excessive inflation is bad because it leads to people not being able to build up savings, not being able to afford goods and services, etc, but it eventually self corrects (unless the government keeps printing money) as people stop being able to afford goods and services, and that causes negative pressure on prices.
Deflation is a positive feedback loop. People can't afford shit so jobs disappear so people can't afford shit so jobs disappear etc etc.
They can if they have savings. If you live paycheck to paycheck and you lose your job, you don't get to enjoy the cheaper goods. You can't afford them anyways.
Lots of rich families these days in the states became rich when their great-grandparents who already had accumulated wealth bought cheap assets during the depression. But the common people selling their house for cheap because they just can't get a job and need some money to buy food got ruined.
Breaking out of that deflationary spiral took stuff like the New Deal and World War 2: massive government spending to provide jobs so that people finally had money to buy goods again, so more jobs are created, so that demand for goods increased etc.
Wars tend to be inflationary. The war machine demands lots of goods and war disrupts trade and diverts manpower from factories to the battlefield. Higher demand for less supply, prices go up.
Because they lost their job and no longer have a stream of income coming in. Sure, they can afford a lot of groceries with their last paycheck, but once that paycheck and savings are gone, there is nothing to use to buy. If people aren’t buying, more people lose their jobs/business, and more can’t afford to buy anything even if it is cheap. It’s a cycle that leads everyone to have no money to pay for goods, even if items are cheap. Sure, a pack of diapers is now 50 cents, but you won’t even have 10 cents.
Also, 60% of the US population are living paycheck to paycheck. Even missing one paycheck would lead to millions losing their homes. Their mortgages don't drop in price, even if the price of milk does.
In simple terms, because deflation also impacts wages.
If a company is paying you $50,000, but realize that if they wait 6 months they can hire someone for only $40,000 they're going to fire you and hire someone cheaper.
So yes, the money in your bank account is going to go further, but you should also expect for your paycheck to get smaller over time.
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u/guto8797 18h ago
And deflation is great if you have a huge pile of money to live off of and don't care about general misery and decreased societal well-being.
But if you have a job, deflation very quickly leads to you losing it, as demand for goods and services shrinks, people are laid off, they can't buy stuff so demand for goods and services shrinks further, more people are laid off etc etc.
Excessive inflation is bad because it leads to people not being able to build up savings, not being able to afford goods and services, etc, but it eventually self corrects (unless the government keeps printing money) as people stop being able to afford goods and services, and that causes negative pressure on prices.
Deflation is a positive feedback loop. People can't afford shit so jobs disappear so people can't afford shit so jobs disappear etc etc.