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
Prices go down but so does revenue for the companies and the economy slows which makes it harder to stay in business, partially because they are simply earning less due to lower prices but also because deflation incentivizes me holding off buying things today because I know it will be cheaper next year.
They can try lowering prices more to increase business but that is not possible forever so the other alternative is to cut expenses like the workforce. Less people with jobs means less spending, less spending means less revenue, less revenue means more layoffs and so on...... Things can spiral quickly once it gets going.
The central banks can try to boost the economy by lowering interest rates, effectively trying to cause inflation, but they can only do that if they have room to lower them properly, 0% is the lowest it can realistically go and if that is not enough to boost things back in order then there is nothing anyone can do and everything will collapse rather quickly.
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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