r/PeterExplainsTheJoke • u/Melodic_Judge_129 • 9h ago

Meme needing explanation Petah?

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u/IrksomFlotsom 8h ago

Try and think of our global system as an engine that's purpose is to make fuel for itself. It needs to keep it's input above the output in order to keep powered on. As soon as the input drops below output the machine starts to slow down and can no longer sustain itself. The engine is not designed to slow down so it very quickly breaks down

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u/Gentle_Snail 8h ago edited 8h ago

Deflation can also result in a very negative feedback loop, the Great Depression was a deflation spiral for example.

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u/Mayor_Death 7h ago

Is deflation a cause or symptom, though? To me, it’s just a number, but I understand that it is more than that to various economic groups.

As far as I understand it, deflation indicates that prices are going down, which is a good thing to me individually.

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u/dediguise 4h ago

Sounds great when you are thinking about consumer prices, not great when we are talking asset prices. Like when the housing bubble burst. Deflationary spirals mean that all assets(which are leveraged for other assets based off of their book value) also drop.

Then factor in that if consumers wait until the next day to buy something because they expect prices to fall, then consumer spending also plummets paired with a decline in the velocity of money. Taxes are often paid based on a transaction basis, so tax revenue drops relative to both the drop in prices and the velocity of spending.

Cheaper consumer prices in this case are a temporary relief as the suppliers of said consumer goods are driven out of business.