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
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.
These are inelastic necessities.
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.
Not exactly true, also you're only thinking on the individual level.
Even in an inflationary environment the rational thing is not to consume, but to invest in investments where the expected return beets inflation.
And in a deflationary environment, this flips. In deflation the value of held cash goes up, and usually investments fall. So companies invest even less, and that leads to a negative feedback loop.
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
Tell me you don't understand the basic concept of inflation, without telling me you don't understand the concept of inflation. Inflation is an effect on the value of MONEY. The wealthy invest their money specifically because of inflation, because their investments will beat inflation. Because a dollar today is worth more than a dollar tomorrow. So they don't hold the dollar they invest it. They no longer have a dollar, they have a share. In a deflationary cycle that share becomes worth less tomorrow and the dollar becomes worth more, so they stop investing.
This discussion is boring. I give facts. You give theory. I give facts. You give theory. Last fact.
Renewable energy market is bigger today despite deflationary effects on solar panels and batteries. Give me facts. I will not entertain more theory.
In deflation the value of held cash goes up, and usually investments fall.
You are conflating deflation with a recession. Invesmtents only fall under recession. Not deflation. Otherwise the EU economy would have been in a recession since 2008, and Japan would have been in a recession for ~4 decades now.
Governments hate deflation because it forces fiscal discipline. But there is a reason why every healthy economic recovery from a recession (measured by median income and purchasing power relative to inelastic necessities) is proceeded by deflation.
And every K shape economic recovery is proceeded by massive money printing trying to force end a recession through money printing that benefits the wealthiest and harms the majority
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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