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/Amazing-Barnacle9251 3h ago

2 big issues : nominal wage rigidity, and real debt burden.

Nominal wage rigidity means most people won’t accept a pay cut in dollar terms. If money is worth more (I.e. in a deflationary period) your labor is now more expensive. If you aren’t increasing productivity to offset, you’ll get fired. No job is a bad outcome.

Real debt burden : today you owe $100.,000. Under inflation, the real amount you have to pay back shrinks through time. Under deflation, it grows. This leads to more defaults, which leads to capital stress for debt issuers, which leads to either bank runs and / or bailouts. See the Panic of 1907, depression, and all the mess that came out of the 08 GFC.

Only good if your assets are in actual, physical currency in your possession, you’re unemployed / retired, and owe no debts. And you can keep the mob with pitchforks at bay.