Nobody is going to give hungry because food will be cheaper next year. Nobody is going to go homeless because rents will be cheaper next year. Even if doing nothing is a good strategy, humans aren't going to do nothing because our time on earth is finite and we hate saving.
Even in an inflationary environment the rational thing is not to consume, but to invest in investments where the expected return beets inflation.
From the perspective of the wealth (who account for most consumption) we have effectively been in a deflationary environment as their investment returns consistently beat inflation
A deflationary environment is the opposite, where people sit on cash instead of investing because they believe that the investments will be worth less than the cash in the future. Inflationary environments are what make investments the smart choice, if we were deflationary no one would invest money.
I mean, I live in Australia and something like that could possibly be good for the economy. We have an incredibly nondiverse economy, basically the best way to make money is housing, which is out of reach for most, owning a business even more so.
Housing is unique because it’s simultaneously an investment, and a thing needed to live. The solution for Australia is to separate the investor side from the living needs side, so that people only have one house. But the rest of the economy still doesn’t want deflation
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u/OpenRole 7h ago
Nobody is going to give hungry because food will be cheaper next year. Nobody is going to go homeless because rents will be cheaper next year. Even if doing nothing is a good strategy, humans aren't going to do nothing because our time on earth is finite and we hate saving.
Even in an inflationary environment the rational thing is not to consume, but to invest in investments where the expected return beets inflation.
From the perspective of the wealth (who account for most consumption) we have effectively been in a deflationary environment as their investment returns consistently beat inflation