Because of how corps react to lower prices. They would just lay everyone off. Deflation itself isn't the issue, it's how little protections actual working people have and how much incentive corps have to keep their stock price high. Being able to sell something for less means less profit for the corps which is a big problem for corp leadership. So the solution is to temporally increase profits by getting rid of staff.
Ahh ok so basically it all just comes down to corporate greed determining how much we should all suffer and be punished for even considering the idea that their stock price doesn't have to keep going up every 3 months and that they might be able to survive on 5% less profit this year compared to last year. Got it.
But isn't the reason people aren't buying as many things due to the high prices? If prices go down and people have more money to spend don't they naturally just end up buying more things like when the government provides stimulus cheques? I used to buy heaps of random treats for myself when it was affordable, new shoes all the time, new suits for work each summer/winter, random shit I saw on Amazon I liked, stuff for my hobbies etc. Now shit is so expensive I'm wearing my old suits until they literally tear and become unwearable, I haven't bought any new sneakers in at least 2 years, I only make essential purchases on Amazon and my hobbies have sat dormant because I just can't justify spending the money because rent, bills and groceries are eating 90% of my paycheck. If prices went back down to 2019 levels overnight I'd start buying more shit almost immediately. So I'm just confused how higher prices are better for the economy than lower prices.
So I'm just confused how higher prices are better for the economy than lower prices.
It helps to remember that "the economy" as the media defines it means "rich people's money." Not our money. As long as the stock market is going up, "the economy" is good. It doesn't matter if the rest of us are living in poverty, especially now that the stock market has fully decoupled from actual company performance. Tesla could shut down all its factories and never sell another car again, and the stock price would only drop like 5% before turning around and going back up again.
If prices went back down to 2019 levels overnight I'd start buying more shit almost immediately.
If a 40% (!!!) deflation happened?! No, you wouldn't, because you'd have no money because you'd have no job. Oh and also enjoy your student debt/mortgage being almost doubled! That would be a crisis far beyond the Great Depression, probably the collapse of the Western world.
The whole point of my comment was not "I don't think people would lose their jobs" but more "why would people have to lose their jobs" when a massive price drop would promote a huge amount of spending and economic activity when right now people are very limited in what they can afford outside of essentials. It's asking why did the economy work perfectly before covid at 40% lower prices and why would the economy basically explode and self destruct if prices went back to those levels and companies just made a bit less profit. If a company had 1000 staff in 2019 and was profitable and making good money, now they still have 1000 staff and are making way better money without any significant increase in labor spending as we all know wages haven't been going up, why would they need to suddenly fire half their staff if they had to go back to only making "good" money and not "great" money if firing all their staff just turns into a negative feedback loop if all the companies do it and now no one can buy anything. Isn't it better for companies to not just look towards the next earnings calls and accept a loss in profits while still making millions rather than do some knee jerk layoffs that may save their profit margins in the very short term but tank the economy and their business in the medium-long term?
Because in order for companies to make "good money", employee wages would also have to go down to pre-COVID levels. And - despite what grifters may say, wages have been rising faster than prices - real wages (aka wages with inflation counted in) have increased since 2019.
If we stay away from magical thinking where a 40% deflation happens tomorrow and take into account that it would happen over years, then the reason you wouldn't buy things is because tomorrow they will be cheaper and the next day cheaper still. While your debts rise at giant speeds and the economy tanks.
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u/azac24 5h ago
Because of how corps react to lower prices. They would just lay everyone off. Deflation itself isn't the issue, it's how little protections actual working people have and how much incentive corps have to keep their stock price high. Being able to sell something for less means less profit for the corps which is a big problem for corp leadership. So the solution is to temporally increase profits by getting rid of staff.