Legit please do correct me if i'm wrong, but if price of product x goes from 5 to 10, my 1000 salary would mean i can now only buy 100 of x instead of 200, but if x went from 5 to 2, it means that, while my salary is still the same, my purchase power is now higher, because now i can buy 500 of x instead of 200
It all makes sense to me , except why are people so sure its going to be cheaper next week. How would people instantly know it isn't a temporary situation. Im actually trying to learn something, not argue.
Why would an average person assume it would go on indefinitely? Aren't there more people who are priced out of buying commodities than people who can afford them currently. Why wouldnt the next step down in wealth pick up the slack of the people who are currently able to afford them (the savers during deflation). I know im wrong, I just want somebody to explain why I'm wrong.
Deflation is a death spiral. Once it starts, it's incredibly hard to stop. The same way the average person knows that inflation is happening, they know that deflation is happening.
But I think you aren't thinking big enough. In a deflation, people are still buying eggs and bread, sure. But if you're thinking about buying a $1000 TV to replace your old TV, and the price might drop to 900... Why not wait? You don't need the new TV today. And people moving houses will delay because the price might drop. Business will delay their orders. It's uncertainty sure but that contributes. And then because nobody is spending, the deflation continues. One business starts firing people because of the early signs of deflation. Those fired people can't afford things, so prices drop. So more companies fire more people. They stop making products. Prices drop again. And it keeps going.
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u/WHATZAAAAA 8h ago
Legit please do correct me if i'm wrong, but if price of product x goes from 5 to 10, my 1000 salary would mean i can now only buy 100 of x instead of 200, but if x went from 5 to 2, it means that, while my salary is still the same, my purchase power is now higher, because now i can buy 500 of x instead of 200