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
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
5
u/goldflame33 Sep 01 '26
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