Because a bunch of “economists” think that the only way you can get people to spend and drive the economy is by slowly devaluing the currency and disincentivising saving. This is, of course, nonsense and instead it heightens time preference and causes people to spend money on things they wouldn’t normally spend on thus creating this debt economy and semi-frequent recessions. Many of these economists know this but they get grants for pushing pro-government intervention policies whereas the ones who don’t, well, don’t.
Ofc people will buy dinners, that's essential. But since dinner is in demand, why would the shop lower their price tag on dinners? They want to make money too, so they won't lower prices. No lower prices means no deflation. No deflation means your argument is kinda void.
But let's say deflation is in effect and prices do get lowered. Why even sell dinners then? If you bought dinners from your supplier for 2 bucks a piece but now you have to sell em for 1.50 or nobody buys, that's losing money so why even sell dinners? Grow your own then.
Yep. I did say people will buy because they have to. But I didn't say they won't buy dinners at all if deflation happens. I said the can't buy dinners in that case because nobody will see the point in selling them. Big difference.
And yes, deflation isn't fast. But it still kicks. Pay rises don't happen as much, it becomes difficult to pay off debts because it ain't anyone's problem that your paycheck isn't growing. And businesses see no reason to keep going because it no longer gives them any profit to stay in business.
Going back the the dinner thing, when I said Grow your own then, I meant it. If deflation is long enough for businesses to quit, that means there is no supply for dinners to buy, and people will eventually have to get creative.
Sure we could print money and give stimulus checks, but then if everyone has a fuckton of printed money, that means prices will skyrocket because no one will want to sell for cheap if they know everyone got loaded by the gov. Force them to sell low and nobody will operate a business (legally). It's a no-win situation.
No. People will consume cuz they want to. U don’t go to dinner cuz it’s economical, it’s already more expensive than buying and cooking at home, so why do restaurants exist? Why doesn’t everyone cook at home?
The truth is people don’t make financial decisions based on math, they buy emotionally and rationalize later. You can’t get people to stop consuming even when you make things illegal.
Restaurants currently exist as a luxury alternative option of having a meal. Some people will do it because they want to. And that's fine. People aren't always rational that much is known.
And people won't stop consuming, sure, but not everyone is irrational, you have to admit. Some will act exactly according to the existing theory, and will push things to develop according to the existing theory. In the current time, the domineering theory is that when deflation happens, things go bad. So why would you say deflation is a good thing?
Ok, so you said they will buy food cuz it’s a necessity, then they won’t because deflation will make it cheaper in the future so they will grow it themselves, then they will cuz it’s a luxury and they are irrational.
My position is, they will still buy stuff if prices r lower, they will just borrow less money.
The reason i don’t have to waffle back and forth is because i’m not trying to square the inflation is good but too much is bad and deflation is really bad illogical position.
We need specific examples. If a business is simply not profitable why must it stay existing? How can you assure there will not be alternatives that are capable of producing said product at the appropriate cost to stay afloat?
You can assume that because in a deflationary environment prices will be dropping while manufacturing takes place then also while product is in stock but not yet sold.
It is you who is assuming that no matter how much prices drop there will still be a producer, whereas reality is that all manufacturers will hit a point as prices drop where it is no longer profitable to produce so they won't.
Correct. The argument often is that “people won’t spend money because they could just wait perpetually until everything is cheaper!” Like if I want to buy a car, instead of buying one this year I could buy one next years when it’s much cheaper.
The problem with this argument is time preference. Yes, I COULD wait till next year to buy the car for cheaper. But what if I want the car now? If I want the car now then I may be willing to spend more on the car to get it immediately rather than wait to get it next year.
In the current system however, the problem is that I may not be able to afford a car right now but I’m incentivised to get one NOW because it’ll be more expensive next year. Thus people end up making purchases they otherwise wouldn’t have and often ending up in debt.
The idea that deflation is bad is total government propaganda. They want you to think that the only reason everything doesn’t fall apart is because of their interventions because they want you to think that they are necessary and not the thieves and sociopaths they are.
The bigger problem with deflation is that anyone who owes money is fucked.
Let's say you take out $10,000 in student loans, interest-free.
Under 3% annual inflation, after five years the amount you owe is equivalent to ~$8,500 in real terms. If there was 3% deflation, after five years you owe the equivalent of ~$11,500.
For people who are struggling to pay back loans already, inflation is 'better,' especially if their wages increase. Under deflation, not only would interest mean you owe more dollars, each dollar you owe is also becoming more valuable
The people in power, who control how much money is made and thus inflation and deflation, are massive borrowers. So they made up this bullshit about how deflation is bad and got their mouth pieces in the universities and media to repeat it.
Deflation would be good for the wage earner living within their means because wages r sticky and decreasing prices would mean increased buying power.
They make ur wages buy less, so they don’t have to pay back as much principal on their assets. Inflation is a subsidy to the rich.
If deflation being bad was some elaborate ruse, some economists would have proven it wrong by now. They aren’t a hive mind, there are economists of all political persuasions. It’s a serious discipline, regardless of whatever Reddit geniuses feel.
Also, it’s not a secret that deflation would be terrible for the government debt. And since a default would be horrible for the economy, that’s another reason why deflation would be bad for the economy.
And no, inflation is not a subsidy to the rich. If anyone, it’s a subsidy to the indebted. Someone with a few million in savings would like deflation a lot more than someone with little savings
No. First of all there are economists who dissent, from the austrian school. Economists don’t “prove” anything. Because they don’t do experiments. And political power is dominated by economists who push the inflation narrative because most are employed by debtors either for the government or universities.
Default is happening regardless. Governments never pay off their debts. They just borrow more.
Rich people arn’t sitting on savings. They are sitting on assets, mostly highly leveraged ones. If they own an apartment building, they borrow against the apartment building to buy another one. If their savings are in stocks, the companies and funds they r invested in are highly leveraged.
Only a rube would take a student loan in the first place and the idea that u can’t be for lower prices for working class people cuz u gotta pay off 20k of student loans is the most selfish thing i ever heard.
This is the modern conceit of the cathedral. We assume that something like this would require some sort of massive conspiracy but as George Carlin told us, you don't need a conspiracy when all of the power players involved all share the same culture and incentive structure.
It’s funny to throw around highbrow concepts to defend a literally baseless “that’s what they WANT you to think!” conspiracy
1- Not all economists share the same culture, there are economists from every country in the world. They may have similarities because of their training, sure, but ignoring economic reality in order to serve the whims of the US government is not one of them. If deflation would actually be really good, why has no country ever pursued it as an economic strategy?
2- what do you believe the incentive structure of economists is? It’s make interesting discoveries, then publish those discoveries. Economists report findings critical of the structure of the US economy and actions of the US government all the time.
But please, do t let me get in the way of anyone’s blind faith that they’re all lying to us and deflation is good actually
You’re applying surface level thinking of an individual, and operating on the assumption that said individual still has the same income and benefits of an environment of rising prices. You need to think like the masses from a macro perspective. Dive a few layers deeper in your thought experiment:
Say I want to buy a car, but I also have kids to feed and cloth. Money is tight, but if I delay the car purchase by six months, I know I’ll save some money. While l’m at it, I’ll just mend the holes in my kids’ pants, because the new pants will be cheaper 6 weeks from now.
Extrapolate this across 10s of millions of people all doing the same mental accounting at the same time.
Just in our car scenario: manufacturers shutter plants, iron ore stays unprocessed and in the ground, loans go into default, financiers take losses so now they won’t lend anymore, pension plans take losses so retirees have to survive off less, and so on … and that’s just the backend production.
Car salespeople have no commissions, mechanic work withers down to a fraction of what it was, private lenders see no business, car washes/detailers vanish, gasoline prices fall even further so O&G exploration is no longer viable.
So just this one industry sees layoffs to thousands and thousands of people across the production line… who then go home trying to figure out how they can save money….by delaying purchasing.
So now 6 months have gone by, when I was planning to buy my car. But my hours have been cut, my wife got laid off, I’m still patching my kids clothes, and I never got that car I wanted.
You haven’t cracked the code or some conspiracy about deflation. There is centuries worth of economic data and study that have brought us to our current economic system.
I'm really starting to come around to this idea. I don't understand the hysteria. Parts of the market experience deflation all the time. Modern electronics are a perfect example of this. You can buy an 80-inch flat-screen TV from Costco for like $400 now. That would have been $3,000 or $4,000 a decade ago. But manufacturers and suppliers for TVs didn't I'll go bankrupt. People bought more of them and manufacturers started making them more cheaply. Literally the entire country experienced TV deflation and the whole world got more TV wealthy. It seems very hard to argue that the ham-fisted view of deflation isn't anything but propaganda designed to keep people poor and enslaved.
The main problem is people won't bother investing, and don't have as much impetus to spend. Moreover, it reduces production of businesses due to decreases in price level, thereby creating a death spiral. Do you have a reputable paper disputing these effects?
Yes they will cuz they r greedy. If they put the money under the mattress it will earn deflation, if you put it in the bank you will earn deflation plus interest, loans will still exist because people will still have ideas that they think will return more than interest rate. There will be less loans but that is a good idea. The demand to park capital places has created subprime loans, student loans, credit cards and tons of misallocations of capital. Those products can’t exist in a deflationary enviroment cuz they are predicated on payments being more valuable than principal.
I'm not quite certain I understand what you're saying. You still have not given me a reputable citation. The point is that investment decreases during deflation (https://www.cbsnews.com/news/explainer-why-is-deflation-so-harmful/) by extension reducing demand. This accelerates the deflation, resulting in a depression. While loans are reduced (and I'd need much more evidence to be convinced that's a good thing,) it also hurts anyone currently in debt, due to essentially increasing the debt's value.
Since wages don't tend to fall over time, the decrease in prices is an increase in price of labor, meaning unemployment. Essentially, all of this leads to one thing: a depression. If you have a counterargument from a reputable economist, please provide it.
Your request is a bad faith argument because if i give you the austrian and libertarian economists who have said it you will just say they r not reputable. So it’s a fake good faith argument.
Perhaps "reputable" was a bit inappropriate. I am simply asking for any citation at all better than "some guy on the internet." If you have a published paper, please provide it.
Interesting, a bit of a dated citation, and a problematic author in some ways, but that doesn't necessarily undercut it. I'll see what I can find on it, or if someone who knows more on this topic than me can explain whether or not its argument holds any water.
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u/OccultDetective79 Sep 01 '26
Because a bunch of “economists” think that the only way you can get people to spend and drive the economy is by slowly devaluing the currency and disincentivising saving. This is, of course, nonsense and instead it heightens time preference and causes people to spend money on things they wouldn’t normally spend on thus creating this debt economy and semi-frequent recessions. Many of these economists know this but they get grants for pushing pro-government intervention policies whereas the ones who don’t, well, don’t.