So, inflation. Prices and paychecks go up (though not toe-to-toe), and money loses value because it takes more money to buy the same thing than it took earlier. We hate it when it's high because prices go up, everything's expensive, we can't buy shit. Consumers cry. However, the opposite is just as bad.
Low inflation means prices aren't going up much, or at all. Consumers cheer. Very low inflation, however, close to 0% or even negative (that's deflation), is a problem. If prices start dropping, rational people will hold off from buying stuff because they'll wait for prices to go even lower. That can and will kill businesses because they don't get any revenue when people aren't buying stuff. And when business isn't booming, it can mean layoffs at your local grocery store or something, because business owners also want to save money.
Another thing where inflation has meaning, is debt. Mortgages, leases, etc. Even the 10 bucks you owe a friend. If inflation is high, those debts start having less impact on your money because by then you hopefully got a small raise, and so debts are easier to pay off. Low inflation makes debts bite just as hard, and much harder if deflation happens, because bread being cheaper doesn't mean your mortgage payments will be smaller.
Anyways, quick crash course on inflation done, hope you learned something. More educated Peters pls correct me. Barely educated Peter out.
Yeah sorry the whole people will wait to buy stuff is a huge myth, this never happens.
1 you have staples that people will always need to buy like food.
2 things like new iPhone and new cars prove people will still buy when they know it will be cheaper in the future. In fact they don't just buy the line goes out the door whenever apple release a new phone, don't those people know it will be cheaper if they wait a few months?
Another real world example would be gas prices at the end of Bidens term. Gas prices were going down, deflation, and at the same time gas companies were posting record profits. Because when prices go down people actually buy more stuff not less.
iPhones are a luxury good and a status symbol. Of course people will line up in droves for them. Well-off folk, or dummies who don't understand what a burden debts can be, will buy status symbols just to flex if they care about that kind of stuff to begin with. Irrational behaviour, but fully understood behaviour.
As for prices, not an American so can't say I fully understand it, so I'll concede there, but I will ask if you think people mass buy when prices go lower because they know lower prices won't last long, or is there something else in play? Profit records are a different topic, can't really comment because not enough data. Were they posting record quarterly profits, weekly, monthly, annually, idk. I'd wager the reports are for a longer period of time, which ofc would be record profits when compared to that time period the previous year.
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u/BalticHorndog 9h ago
Hi. Barely educated Peter here.
So, inflation. Prices and paychecks go up (though not toe-to-toe), and money loses value because it takes more money to buy the same thing than it took earlier. We hate it when it's high because prices go up, everything's expensive, we can't buy shit. Consumers cry. However, the opposite is just as bad.
Low inflation means prices aren't going up much, or at all. Consumers cheer. Very low inflation, however, close to 0% or even negative (that's deflation), is a problem. If prices start dropping, rational people will hold off from buying stuff because they'll wait for prices to go even lower. That can and will kill businesses because they don't get any revenue when people aren't buying stuff. And when business isn't booming, it can mean layoffs at your local grocery store or something, because business owners also want to save money.
Another thing where inflation has meaning, is debt. Mortgages, leases, etc. Even the 10 bucks you owe a friend. If inflation is high, those debts start having less impact on your money because by then you hopefully got a small raise, and so debts are easier to pay off. Low inflation makes debts bite just as hard, and much harder if deflation happens, because bread being cheaper doesn't mean your mortgage payments will be smaller.
Anyways, quick crash course on inflation done, hope you learned something. More educated Peters pls correct me. Barely educated Peter out.