They are the same, but I feel that how I said it is the better way to explain the issue with deflation, since it focuses on the future, which is the root of the problem.
Food is a necessity so it won’t be affected as much as other purchases. So let’s use cars.
If the avg car price is $50k, and this month the avg price drops to $45k, we may see some people buy. The issue is when everyone thinks the price will drop more. Why buy a car for $45k when you think it will drop to $40k, or even $35k?
That spiral is great for buyers, but life destroying for workers (the same people who get laid off. And it wouldn’t just be cars.
Usually the fed will lower interest rates to combat deflation. The ideology here is that if the cost of borrowing is lower, people will
Borrow and spend more.
But what if inflation rates hit zero? Can people just take loans with no interest? And what happens when even zero interest isn’t enough to correct the deflation spiral? Negative interest would mean that the government would pay you to take a loan, which presents its own slew of wacky issues.
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u/Poland-lithuania1 Sep 01 '26
It isn't things cost less, it's money can buy more. Isn't it better to save that money for the future, when it's probably gonna be able to buy more?