r/PeterExplainsTheJoke • u/Melodic_Judge_129 • 9h ago

Meme needing explanation Petah?

Post image
14.7k Upvotes

92% Upvoted

2.7k comments sorted by

View all comments

Show parent comments

1.3k

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

820

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.

197

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.

1

u/TehAnonAMoose1 1h ago

Right, numerically and individually deflation seems like a good thing. "I get to spend less on stuff, right?" But the problem is that it's not sustainable. "The market," (consumers, investors etc.) tends to freak out when stuff starts being worth less. Sure a dollar can get you more during deflationary periods but now that gold you bought with a dollar is only worth 70 cents. Or the car. Or whatever item.

For example. Let's say you put 50k into a farm/agriculture business. Deflation is occurring across your national market. The next year if you tried to sell your farm it only nets 40k, max, because everything is worth less now, so no one is willing to pay more. And that's only if you can secure a buyer. Own a home? Deflation bad for home owner. Generally, people that own things like for that value to appreciate (go up) not depreciate (go down).

So now you're REALLY trying to get rid of your farm to get some of your money back, but look, everyone in "the market" already had the same idea and there are hundreds of farms for sale just like yours and no one is buying because everything anyone could sell to get the money isn't worth as much as it used to be. Then people start panic selling, because they feel like they need to at least get SOME money out of whatever it is. The panic selling increases the supply, but the demand doesn't change. This makes stuff worth even less.

So yes. In the short term, for a consumer, deflation is good. But long term deflation makes everyone's stuff worth less. That means we all have less. Get it?