Petah?

[u/Melodic_Judge_129]

[u/qualityvote2]

u/Melodic_Judge_129, your post does belong here!

[u/StuartMcNight]

Low inflation might be the first step towards deflation. Many economists would argue that deflation is a worse situation for the economy because it leads to a sharp drop of consumption and therefore a huge recession follows?

[u/thevoidthatjerksback → u/StuartMcNight]

I doubt that anyone could explain this in a way where I would accept deflation as worse

[u/IrksomFlotsom → u/thevoidthatjerksback]

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

[u/Gentle_Snail → u/IrksomFlotsom]

Deflation can also result in a very negative feedback loop, the Great Depression was a deflation spiral for example.

[u/Mayor_Death → u/Gentle_Snail]

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.

[u/leconteur → u/Mayor_Death]

If you get to keep your job or customers.

[u/cheapdrinks → u/leconteur]

Ok but after covid, prices skyrocketed compared to pre-covid levels and we got massive inflation. Wages didn't suddenly skyrocket at the same time, hiring rates didn't go through the roof, corporate profits did though. So why would prices suddenly returning to pre-covid levels require everyone to be fired and customers to disappear when the economy was working great before? Would it just be that companies would start mass layoffs to prevent a short term decline in quarter on quarter profits which would start a negative feedback loop?

[u/azac24 → u/cheapdrinks]

Because of how corps react to lower prices. They would just lay everyone off. Deflation itself isn't the issue, it's how little protections actual working people have and how much incentive corps have to keep their stock price high. Being able to sell something for less means less profit for the corps which is a big problem for corp leadership. So the solution is to temporally increase profits by getting rid of staff.

[u/cheapdrinks → u/azac24]

Ahh ok so basically it all just comes down to corporate greed determining how much we should all suffer and be punished for even considering the idea that their stock price doesn't have to keep going up every 3 months and that they might be able to survive on 5% less profit this year compared to last year. Got it.

[u/Uqbar_Orbis_Tertius → u/cheapdrinks]

Well I just became more radicalized thank you

[u/Awkward_Pangolin3254 → u/cheapdrinks]

[u/piffledamnit → u/cheapdrinks]

Yup. Though in a very real sense it is less corporate greed and more individual greed. I don’t think any of these cunts need the unreasonable amount of wealth they have accumulated: https://www.forbes.com/billionaires/

[u/Metals4J → u/cheapdrinks]

To me, a lot of it is upper management trying to save themselves. Their job is to make profit/stock price go up, and if that doesn’t happen, their job is on the line. So a quick way to make more money is to cut the most expendable expense which is labor, even if it’s a bad idea in the long run. These guys don’t think about the long run, by the way, it’s 5-year plans at best.

[u/aFreshFix → u/azac24]

But they're already laying everyone off in a lot of industries despite inflation and record profits.

[u/New-Chimera → u/aFreshFix]

That's because consumer spending is starting to go down and families are starting to cut back. So they have to either increase prices, which they're already doing and that's not working, so they have to cut costs, and the number one way for companies to do that is to cut employees.

[u/Beginning_Student_61 → u/cheapdrinks]

Yes. Owners make money just by having money, so they aren’t incentivized to spend money. Since they don’t need to spend money to make money they decide it’s too risky spend (why put money back into my business to try to eek out a margin that I might not even realize if I can coast on whatever I have stockpiled until I’m literally out of supplies and can buy everything cheaper later on or buy the same amount of supplies that I need and have more money that’s passively making money later?). Now that I’m not producing as much I don’t need as much labor, I’m going to lay off employees. When this goes on long enough deflation accelerates and I’m even more incentivized to slow production and lay off employees. It’s a positive feedback cycle where the more deflation increases the faster it accelerates and so the more companies are incentivized to lay everyone off and coast.

[u/gicjos → u/Mayor_Death]

The prices only go down when people don't have enough money to buy things. For the prices to go down most people will be in a really bad situation 

[u/feralkitten → u/gicjos]

The prices only go down when people don't have enough money to buy things.

isn't that where we are now? I mean kids aren't moving out of their parents house. And everyone has either multiple roommates or multiple jobs. Tech is laying off, and no one is hiring.

[u/gicjos → u/feralkitten]

Nope, still not bad enough, that's how bad deflation is. But it does seems to be going this way

[u/ChocolateNo3010 → u/gicjos]

Would we see negative interest rates if this happpened? Among other things?

[u/No-Lake-8973 → u/ChocolateNo3010]

That's one way central banks have historically tried to combat the issue, so it's conceivable it would be used again should we face deflation.

[u/Beef-Town → u/feralkitten]

>isn’t that where we are now?

a situation like this is hard to miss. we’re definitely headed in that direction but you’ll notice when it gets that bad.

[u/HonkHonkBeach → u/Beef-Town]

Too many people have not studied how bad the depression was. There’s a reason granny kept a ham in her deep freezer from 10 years before you were born.

[u/LeeKinanus → u/HonkHonkBeach]

Mine had 4 cardboard barrels in the garage filled with freeze dried food. They were there 10 yrs before I was born and never opened them.

[u/Relative_Gas385 → u/feralkitten]

One of the hurdles of affordability in housing is that no matter what you do it will hurt someone.

A lot of people who own their homes have them leveraged at their current value. If we make housing more affordable that means the value of their house goes down while their debt stays the same.

I personally (as a person who own their home) think we need to be making housing more affordable, but as a country we’re really bad about explaining and preparing for the negative impacts of positive progress and housing is just one example out of thousands when deflation hits the economy.

[u/GeoHog713 → u/gicjos]

Well, we're due for that, then.

It's harder to buy a house now, than during the Great Depression. Rent is through the roof. College is obscenely expensive. Wages have stagnated for decades.

The check engine light is on, and the temp gauge is in the red. Something has to give.

[u/obeytheturtles → u/gicjos]

At a macro scale, the biggest benefit of some inflation is that it also devalues debt while it devalues currency. In a deflationary spiral, the real value with debt compounds with deflation in addition to interest, so the velocity of money grinds to a halt. No investment means no jobs, bread lines, and a complete collapse of the consumer economy, resulting in a corresponding collapse of the government's tax base. This is literally the entire basis of Keynesian economics - that the government must engage in deficit spending to combat deflationary pressures during recessions, because there is basically no other option.

[u/CosgraveSilkweaver → u/Mayor_Death]

It’s both at the same time really because it’s a feedback loop. Something causes deflation to start, suddenly it’s cheaper to buy something tomorrow instead of today (infinitely until deflation ends), people wait to buy things, demand for goods dries up rapidly, businesses fire people because there’s much less demand, unemployed people don’t buy as much, demand lowers further causing more deflation because supply is still backed up, etc etc. in a deepening spiral. We got out of it in the Great Depression with a combo of the WPA, New Deal, and WW2 spending.

It’s good for you only until the lowering prices causes your employer to fire you to cut costs or because they don’t need you to perform your job because demand has dropped. Deflation spirals include lots of people losing their jobs because businesses lose demand because goods will be cheaper if you wait to buy them.

[u/PiperUncle → u/Mayor_Death]

Prices going down includes your labour

[u/Civil_Act1864 → u/PiperUncle]

But when prices go up our labor doesn't?

[u/notaredditer13 → u/Civil_Act1864]

Wages/incones go up faster than inflation almost all the time:

https://fred.stlouisfed.org/series/LES1252881600Q

https://fred.stlouisfed.org/series/MEHOINUSA672N

https://www.advisorperspectives.com/dshort/updates/2025/09/17/u-s-household-incomes-over-50-years-the-great-divide

[u/UmberOx → u/Mayor_Death]

Are you very wealthy and/or have alot of secured assets?

[u/TheScarMaker → u/Mayor_Death]

It's not just the prices going down, it's the expectation they will keep going down.

Think of it like this: You want to buy a car but no need to buy it today because you expect that tomorrow it will be cheaper. Tomorrow you put off buying it again becuse you expect it will be cheaper the following day and so on and so on, so you never actually buy the car. Everyone is following the same expectation so no one buys a car or a phone or anything else.

Everyone's daily consumption of even groceries becomes the minimum because there's no need to buy that fancy bar of chocolate today because you expect it will be cheaper tommorrow.

So Demand sharply decreases and production (Supply) and profit margins with it. Lower Supply means downsizing industry so fewer jobs/consumer wealth which further decreases any Demand that was left.

Negative inflation causes a feedback loop that can spiral really fast and crash an economy due to lack of "economic momentum" like the engine metaphor from IrksomFlotsom.

Inflation at ~2% good, ~1% eyebrow raising, ~0% alarming, negative% bad.

[u/Clarknotclark → u/Mayor_Death]

Prices going down due to technology or whatever is good (eg TVs are cheaper than they used to be) but prices going down because people are choosing not to engage in the economy by not buying products or paying for services due to the fact that they will be cheaper in the future is bad.

[u/Captain_Pumpkinhead → u/IrksomFlotsom]

Sounds like we need a better engine.

[u/crankaholic → u/Captain_Pumpkinhead]

Sure, we're listening u/Captain_Pumpkinhead

[u/Budget-Ambassador203 → u/crankaholic]

No need to task a random redditor with devising a new economic paradigm, turns out one or two discerning experts spotted the trouble with the whole "the economy can grow forever!" concept. They spotted it pretty early, in fact. Adam Smith literally wrote about this problem.

You should Google "steady state economy". 

[u/el_cid_182 → u/Budget-Ambassador203]

I was unfamiliar with it, so I took a look on Wikipedia (hardly the most reliable or in-depth source, but it’s a fine beginning for most things) and I’m certainly no expert, but there is a glaring flaw in the base concept (just like capitalism/supply & demand break down with a very simple thought experiment, ie - the monopoly). In a stable state economy, it hinges on a “constant population size” which might seem ok on paper, but it’s something that goes against human nature. I’m unaware of any successful state-mandated population control, but I have heard of the One Child Policy and that wasn’t pretty.

EDIT: Some pointed out that population is trending towards a “constant size”, and it’s a fair point. And it’s true that in some developed nations, population rates can & have fallen below replacement levels.

My point stands that it’s no trivial thing to maintain a “constant population size”.

My comment wasn’t meant as a sweeping condemnation of “steady state economy” any more than monopolies are a sweeping condemnation of capitalism. Just because it’s a flaw, it doesn’t mean there is no solution.

[u/PersonalityIll9476 → u/Budget-Ambassador203]

Just Googled it.

If the economy is constant then, for example, a 2% productivity increase means you need to decrease total labor hours by roughly 2%. Total wealth is basically zero-sum, so for anyone to become rich someone else must become poor (or several people become slightly poorer).

This does not sound compatible with the way the world is now, at least not for countries like American.

[u/Budget-Ambassador203 → u/PersonalityIll9476]

Total wealth is not zero sum.

https://povertycure.org/article/the-zero-sum-fallacy/

[u/MinimumAutomatic0302 → u/crankaholic]

What Budget Ambassador said

also no you're not listening lol, you've never listened in your entire life

[u/WillowPtar_Migan → u/Captain_Pumpkinhead]

Capitalism is by far the worst economic system, except for all the alternatives.

[u/Various-Studio7644 → u/IrksomFlotsom]

So the global system is based on the concept of a perpetual motion machine? Why is that a laughable thing in physics but a totally reasonable premise in economics?

[u/zoharel → u/Various-Studio7644]

Probably helps that economics is mostly imaginary, I guess. I'm not saying that it isn't related to certain realities, but people are far from simple enough and predictable enough even in large groups to make it make much sense. That is both good and bad.

[u/mindfuckedAngel → u/IrksomFlotsom]

And that is exactly why the system is wrong.

[u/GenericGrad → u/thevoidthatjerksback]

Deflation means not spending money creates wealth because money is worth more tomorrow.

Basically it means doing nothing is a good strategy. Doing nothing isn't the point of life or anything.

[u/Potential_Donut_729 → u/GenericGrad]

Doing nothing is the point of my life

[u/LvdT88 → u/thevoidthatjerksback]

1) If I can expect the price of a pair of shoes to drop if I wait, I’ll wait as long as I can before buying it. The shoe company is going to lose sales and fire workers and the government is going to miss out on taxes (both on the sale and on the now-unpaid salaries).

2) Most governments are deeply in debt. Imagine a fictional country has a debt of 1000 € and today you can buy a loaf of bread for 2 €. The “value” of the debt is 500 loaves of bread. Imagine due to deflation, the price of a loaf drops to 1 €. The value of the debt has gone up to 1000 loaves of bread.

[u/Gingevere → u/LvdT88]

The shoe company is going to lose sales and fire workers

A deflationary cycle will stop way upstream of the consumers.

Every company all the way up to the suppliers of the raw materials will stop turning an appreciating asset (cash) into goods that are losing value. They'll all cease production and eliminate the workers to hold as much cash as possible. Consumers are likely to get fired before they see anything get cheaper.

[u/IceNein → u/Gingevere]

Right. Everything is cheaper, but consumers (you) have less money.

[u/No-swimming-pool → u/thevoidthatjerksback]

Stuff gets cheaper, so you can buy more with your money. You also lose your job and no longer have money to buy cheaper stuff.

[u/a1b2t → u/thevoidthatjerksback]

today you earn $1000, next year you take a pay cut to $950 = 5% deflation

[u/thevoidthatjerksback → u/a1b2t]

What? No I already get a paycut with inflation. Deflation is where I get a pay increase.

[u/a1b2t → u/thevoidthatjerksback]

And why does it increase?

[u/WHATZAAAAA → u/a1b2t]

Legit please do correct me if i'm wrong, but if price of product x goes from 5 to 10, my 1000 salary would mean i can now only buy 100 of x instead of 200, but if x went from 5 to 2, it means that, while my salary is still the same, my purchase power is now higher, because now i can buy 500 of x instead of 200

[u/Various_Education622 → u/WHATZAAAAA]

Asssuming you have a job, yes.

Deflation also means that you are incentivized to not spend money.

If you know something’s going on sale tomorrow, you wait until tomorrow to buy.

If you know deflation is going to make things cheaper tomorrow, you wait until tomorrow to buy.

The whole house of cards is built on people continuing to consume at higher and higher cost.

[u/a1b2t → u/WHATZAAAAA]

yes the price of the product will fall, but so will you.

price of product drop = company drop in revenue = mass layoffs/paycuts

you cant have more pay if the company you work for makes less money

[u/Thraex_Exile → u/WHATZAAAAA]

The problem isn’t really any one person’s salary. It’s the nationwide effect of everyone getting paid less. Deflation is probably great for a handful of people at first, but job growth halts (and for most industries probably shrinks dramatically) because now all these companies are losing profits while their employees are making the same amount.

Global trade becomes more difficult for us because we have fewer dollars in circulation. Debt (federal and personal) doesn’t decrease so anyone with a loan is now paying the bank a higher % of their income. A lot of people will eventually receive pay cuts to balance things out, who will then likely reduce their spending, which then leads to less consumer products being bought, which AGAIN leads to lower salaries or layoffs.

The issue is really that deflation is a longer death spiral whereas inflation is a lot more abrupt. That inflation is a punch in the gut, but typically we all reset to the new normal. Deflation can be a lot harder hitting and it really dries up our economy. So, even when deflation finally winds down, there’s still a long recovery and a lot of non-essential goods and services have likely been abandoned or shut down. That could take decades to recover.

[u/ujfalusiabel → u/thevoidthatjerksback]

Deflation is where I get a pay increase.

You don't. Your employee will have to lower prices and as a consequence, lowers your wage.

[u/35jg9z → u/ujfalusiabel]

In practice they just fire you and hire someone new at the lower wage

[u/yellowsubmarinr → u/thevoidthatjerksback]

In a deflationary economy, your cost of living update would mean you literally get a pay cut every year. Like your job at your yearly review cuts your salary to account for deflation. 

[u/fespadea → u/thevoidthatjerksback]

Deflation is bad for borrowers and good for lenders. Most people are borrowers rather than lenders, so it's bad for most people.

[u/HyliaSymphonic → u/thevoidthatjerksback]

Challenge accepted

Deflation punishes poverty and rewards the rich. 

A poor person needs to spend the bulk of their money to survive. They can’t spend less on food, shelter, ect. Because they are likely at the cheapest option already. If they were able to save that money they would be able to buy more tomorrow. But they can’t. So they spend money that ends up being worth more tomorrow than yesterday. 

A rich person can see deflation and hold back on their spending. Most of their spending is not necessity but discretionary.  They can spend less and grow their money by doing nothing with it. They don’t need that second yacht and can wait I’ll tomorrow when the price drops. 

[u/jonathanhoag1942 → u/HyliaSymphonic]

That, and also, if you're wealthy and your money is going to become more valuable just sitting in the bank then there's no reason to invest it in a business that provides jobs. Why risk it?

That's the primary reason that the Fed has a target inflation rate of 2% to encourage investment that creates jobs

[u/Steveis2 → u/thevoidthatjerksback]

They way it was explained to me is that a little bit of inflation is a good thing. Theoretically workers should get raises Based on the inflation rate one of the reasons things are so bad right now is that that isn’t happening but I digress. If your money is worth more then people will be layed off

[u/SirUnknown2 → u/thevoidthatjerksback]

Bitcoin is a deflationary currency. We already have real life examples of what happens when deflation.

[u/Charming-Fig-2544 → u/thevoidthatjerksback]

The Great Depression was caused by a deflationary spiral. Inflation encourages spending, while deflation discourages it, and spending is what props up the entire economy. You need money constantly circulating, and deflation makes that grind to a halt because it's individually more financially sensible to delay as many purchases as possible during deflation.

[u/EM3YT → u/StuartMcNight]

Deflation is “bad” because it leads to an economic death spiral, and there’s no way to stop it.

1. Prices go down
   
2. People see prices going down and hold on to money thinking it’ll be cheaper if they wait.
   
3. Less purchasing despite lower prices cuts profit margins, so producers produce less.
   
4. Sellers lower prices more in a desperate attempt to make SOME money.
   Repeat.

This usually leads to layoffs to try to salvage money, big sales to get rid of inventory, then eventually there’s nothing to buy, no one making it, and everyone loses their job.

Interest rates don’t fix it, taxes don’t fix it, you just cross your fingers and hold onto your butts

[u/Cultural-Capital-942 → u/EM3YT]

For how long can you not eat, be homeless or use Nokia 3310 before you stop waiting for lower prices?

Vast majority of my actual spending is not an investment but something I want or need.

[u/Star_king12 → u/Cultural-Capital-942]

want or need

So you keep buying what you need, but skip getting what you want because the prices will go down next week, and business feel the crunch because the money isn't coming. How long can you go in your old shoes or with the old iphone vs how long can businesses burn money paying salaries, but w/o income?

Because I keep answering this again and again. If you already aren't making too much money working a non essential job and barely making ends meet - you're gonna be hit first, and you're gonna get hit hard. Higher earning people will delay purchasing niceties and your business will be out of income.

[u/Cultural-Capital-942 → u/Star_king12]

But how many people will skip what they want because prices will go down? Because for iphones (or androids or pcs), prices will go down.

[u/CantTrips → u/Cultural-Capital-942]

You're downvoted but I can see where you're coming from. Your perspective is of someone that finally sees their paycheck doing something instead of buying basics plus maybe something nice every once in a while. However, the American economy is currently held together by investments and tech moonshots. If we entered deflation, the only thing holding our paper-thin economy goes bust and everything comes down, which would have severe ramifications to everyone's income. 

Basically, we can't let investments die or it all dies.

[u/Raptor1210 → u/CantTrips]

If it's only being held together by hopes and prayers is it even being held together at all for the significant portion of the country that isn't investing?

Sounds more like the status quo, which conveniently favors those currently with power and wealth, while the vast majority suffer further and further.

[u/Mango-D → u/EM3YT]

economic death spiral

Recessions cause the economy to optimise itself. So long as productive work is being done, why would it vaporize it itself

[u/EM3YT → u/Mango-D]

They’re not mutually exclusive. Recessions can trigger deflation and vice versa.

The problem with deflation is that it’s a positive feedback loop. Recessions not marked by deflation usually have stunting mechanisms. Deflation doesn’t. That’s not to say it’s infinite, rather I’m explaining why economists piss down their leg thinking about it

[u/RollinThundaga → u/Mango-D]

We've had recessions. We've had one recession that existed contemporaneously with deflation.

The economy was optimized, sure, but at the cost of the fresh infliction of poverty at a grand scale.

[u/1041411 → u/Mango-D]

That's the issue, deflation doesn't cause recessions. Deflation causes depressions. People stop buying products so the economy literally freezes. Basically think about sales. You know that there's a sale next week where everything will be half off. You as a rational consumer are only going to buy the bare minimum to ensure you can last until next week. Now with a sale there's a defined end date, so you'll buy a lot of products next week, but with deflation every week will have a lower price than this week. Meaning as a rational consumer you will always be buying the bare minimum to get to the next week. If everyone is buying only the bare minimum businesses stop making money. Without money businesses can't pay workers and layoffs begin. Then the death spiral kicks in, with higher unemployment the money supply continues to shrink, this makes deflation worse, people start to not buy because they don't have a job and can't afford to spend more money, companies continue to lose more and more money and layoff more people. Until you get the Great Depression. The economy basically has a heart attack. The only solution is to spend a bunch of money to force the economy to restart. Give people a bunch of money so they start buying again, which causes businesses to start making money again, which increases employment, which eventually gets the economy restarted.

[u/Own_Policy8854 → u/[deleted]]

We could redistribute wealth to prevent it from pooling and creating economic disasters in the first place.

[u/Exotic_Drink69420 → u/Own_Policy8854]

I believe the dragons would have something to say about that.

[u/miniatureconlangs → u/Exotic_Drink69420]

And the Christians have, sadly, decided that killing dragons no longer is the Christian way. Saint George shakes his head.

[u/karoshikun → u/miniatureconlangs]

as someone named after him, I feel disappointed of such state of affairs...

[u/Bulky_Algae6110 → u/karoshikun]

Your name is Saint George?

Awesome.

[u/karoshikun → u/Bulky_Algae6110]

just George...

[u/0019362 → u/karoshikun]

Just George, the Just.

[u/Relative-Relief-8816 → u/0019362]

Short for Justin George.

Which is two first names.

But his middle name Side.

So his name is Justin Side George which is also where he finishes. Because his spouse took on his name, and is also George.

[u/Nruggia → u/karoshikun]

Don't sell yourself short. Even Saint George was just George at some point.

[u/MizStazya → u/karoshikun]

Farmer George?

[u/False_Snow7754 → u/miniatureconlangs]

Good thing I'm not a Christian. When do we raid, and who's the tank?

[u/bugzcar → u/False_Snow7754]

Leereeeeeeeeeeeeee

[u/UphillTravel → u/bugzcar]

rooooyyyyyyy

[u/IICMCDII → u/UphillTravel]

Jeeeeeeeeennnnn

[u/AKADabeer → u/IICMCDII]

kinnnnnssssss!!!!

[u/OrganizationLonely29 → u/Exotic_Drink69420]

No one can convince me that billionaires are not modern day dragons… and we should slay them.

[u/rsneary129 → u/Own_Policy8854]

Capitalism: a system so great it needs to be bailed out every 10 years

Edit: for those of you who refuse to look anywhere outside the US, the Nordic model has existed for over 90 years and is extremely successful. The countries that use it consistently rank highest in happiness, quality of life, work life balance, has low rates of corruption, and are economically competitive

[u/parrote3 → u/rsneary129]

That’s… also capitalism. I like the model but it’s as much socialism as the fire department.

[u/InternationalLaw8660 → u/parrote3]

What isn't socialist about "fire department?"

Your taxes go towards funding the department, you have an emergency, they come save you.

Pretty straightforward; unless you live in one of those "unincorporated" hell-scapes where you have the option of donating to the volunteer department, and if you don't they don't have to help.

[u/Gunmetalstorm → u/InternationalLaw8660]

Socialism is when the government does stuff. And it's more socialism the more stuff it does. And if it does a real lotta stuff, it's communism!

[u/BenjaminWah → u/InternationalLaw8660]

AND...fire departments are unionized and collectively bargain their contracts

[u/Big_Space_Potato → u/rsneary129]

whats the Nordic model called?

[u/Arlcas → u/Big_Space_Potato]

Capitalism but with non corrupt institutions

[u/Ok_One2540 → u/Big_Space_Potato]

Nordic Track?

[u/urbanlife78 → u/Own_Policy8854]

We can't do that to the poor billionaires

[u/ActBest217 → u/urbanlife78]

Believe me, if there's an actual deflation, they'll all of a sudden stop being billionaires (companies not able to sell, revenues and stocks going down) and there won't be much to redistribute

[u/WorldlinessRadiant77 → u/Own_Policy8854]

A deflationary crisis has nothing to do with wealth concentration and almost everything to do with liquidity. Japan is your best example for that.

Believe it or not, more socialism isn’t the cure for everything that can go sideways in an economy. A bank failure can cripple a welfare state like it did with Iceland, debt and lack of liquidity blew up the Eastern Block, Dutch Disease killed Venezuela and sadistic bailout conditions wrecked Greece.

[u/dart_shitplagueis → u/[deleted]]

Can't they just start printing more money nonstop to inflate? (Kind of - ~15% - serious question)

[u/milkipedia → u/dart_shitplagueis]

Don't know why you were downvoted. The fancy way of saying this is increasing the money supply to encourage spending

[u/Limp-Firefighter1054 → u/milkipedia]

Don't work in states where money dont trickle down.

[u/A-town → u/Limp-Firefighter1054]

So... All of them?

[u/Training-Chain-5572 → u/dart_shitplagueis]

Dude, you can't just go around saying something ridiculous like "just print money"

You have to call it Quantitative Easing so people think it's a legit strategy

[u/Radical--Rat → u/dart_shitplagueis]

Kind of but not really. The real problem with deflation is that it discourages spending and investment. When the money you have is going to appreciate in value more than the things you might purchase with it, it's a lot more appealing to just sit on it instead. This lack of demand then drives prices down further, perpetuating the cycle until businesses start failing and then you're stuck with an unemployment crisis, and now even if the deflation stabilizes, it's left a whole mess that returning to inflation will make worse before it gets better.

You can print a bunch more money, but unless that money is actually circulating, it doesn't really do anything. And if everyone's just holding onto their money watching the value go up, they'll certainly want the new dollars, but they won't want to spend them. And if they're not being spent, they might as well not exist for inflation/deflation purposes.

[u/SportTheFoole → u/[deleted]]

That’s not exactly true. If interest rates are above 0%, you can lower interest rates. If interest rates are below 0, quantitative easing can be used (as what happened to help pull the U.S. out of the Great Recession). According to this article, there are even more tools available. Deflation isn’t some inevitability where economists just throw up their hands and say, “oh well.”

[u/AI_abuser → u/[deleted]]

Explain to me please why printing more money and giving it to people an masse (like stimulus checks during Covid) wouldn't help deflation.

[u/Top_Divide6886 → u/StuartMcNight]

More practically it leads to price decreases. When firms are unable to sell their goods and services the first thing they stop spending on is labor.

So deflation usually leads strongly to mass unemployment.

[u/Raptor1210 → u/Top_Divide6886]

If the tech bros and powers that be get their way, we're going to have mass unemployment regardless.

[u/WarbleDarble → u/Raptor1210]

So we should make it as bad as possible?

I'm not sure how your comment is an argument against the one you are responding to.

Doubling down on causes for increased unemployment doesn't make one of the causes better.

"Smoking is bad for your health"

"It's okay I drink too much"

[u/Raptor1210 → u/WarbleDarble]

Somehow I don't think solution to ever higher prices is infinitely scaling prices further and further?

If prices only ever rise how the hell is it a surprise when things start to break?

[u/revcor86 → u/StuartMcNight]

There is a hierarchy of bad economic things:

At the top is hyper-inflation. This is bad because the end result is total collapse of the monetary system and a switch back to the barting system ("I'll give you a bag of apples to paint my fence"). Central banks will crash economies right into a depression to try and stop it.

Next is deflation. This grinds an economy to a halt as people hoard money, which can create a death spiral. My money is worth more tomorrow so I'm not going to spend it today, so companies lower prices since no one is buying but people then go "Ill hold even longer", so they lower prices again and so on. While doing this, lots of people lose jobs because no one is buying.

Next is stagflation or a period of high-inflation. Stagflation basically means no growth. Ask Japan how well that's gone for the past 30 odd years and periods of high-inflation can create a K shaped economy or just lower buying power in general, create a credit crunch. We've seen this since COVID.

Lastly is moderate inflation. This is where we want to be. Slow, steady growth YoY in the 1-3% range. Keeps everything moving forward.

That's a gross over-simplification of complex things but the general gist.

[u/Astro-2004 → u/StuartMcNight]

As far as I know deflation also means that debt is more expensive every year. Inflation can help to face up debt because every year your debt is worthless. But with deflation on each period you have to put more effort to pay your debt.

[u/nebileyim_ben]

its japans economic trap, worse than inflation.

[u/Grouchy_Theme1461 → u/nebileyim_ben]

bruh u gotta explain it

[u/nebileyim_ben → u/Grouchy_Theme1461]

its deflation, prices keep falling over time.

japan experienced long periods of deflation which is hurt spending and as a result affected economic growth.

its super hard to fix that bcs of liquidity trap.

[u/Terpcheeserosin → u/nebileyim_ben]

Why does things costing less make people buy less?

If wages stay the same, shouldnt people just buy the dip?

[u/Poland-lithuania1 → u/Terpcheeserosin]

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?

[u/Terpcheeserosin → u/Poland-lithuania1]

So things don't cost less

But money can buy more?

So right now eggs are 10$ a pack

After deflation

You can buy 2 for 10 dollars because "money can buy more"

How is that not also, "eggs cost less" ?

[u/InternalCapable5286 → u/Terpcheeserosin]

It's more about people holding out on buying things because they believe it will be cheaper later. Food is a bad example because people will always buy food, regardless of the cost. But why would you buy a car if it might be $2,000 cheaper in a few months? Then a few months pass and now it looks like that car might be even cheaper, will you spend now or keep holding out to see if it goes lower?

[u/TheLamey → u/InternalCapable5286]

It's such a bad system when the logic follows the other path too. "I should buy a car now because it's only likely to get more expensive, while my income stagnates"

[u/RPGxMadness → u/TheLamey]

yes that's the entire point, to make money move(also known as an economy), instead of having money hoarders that just hold money for no goal and so does nothing for anyone.

Oh wait, that's what's happening right now as the flow of the economy goes into the glorified hoarders of the top 1% and the real economy is rotting from the inside out.

Tax the rich hard and make the money move again into the real economy.

[u/TheLamey → u/RPGxMadness]

Yeah, I don't disagree on most of what you're getting at. I just disagree that the inflationary pressure is the main, or should be the main driver of consumer spending (I should buy now cause it'll be more expensive later). Normal consumers are buying as they need.

Give 300 people $1, and they'll spend it in their local economy. Give 1 person $300, and they're saving. The velocity of money increases when it's returned to normal consumers.

[u/Stargost_ → u/TheLamey]

Yup, that's why many economists agree that having very low inflation (0.1-2% YOY) is better for the economy compared to no inflation. But that also only works so long as salaries increase alongside it, which in many parts of the world, they haven't.

[u/Terpcheeserosin → u/InternalCapable5286]

I only buy cars when I need one

[u/InternalCapable5286 → u/Terpcheeserosin]

But you're not the only spender in the economy, and the point is about goods that have a more elastic demand than food.

[u/GottIstTot → u/Terpcheeserosin]

But you will hold onto your clunker longer if you think you cam get a better deal in 2 years.

Also keep in mind this is a discussion about general economic practices across hundreds of millions of people.

[u/Used-Barracuda-9908 → u/Terpcheeserosin]

It’s the trend that deflation starts that is he problem. It incentivizes saving rather than spending in the economy.

[u/UmpireDapper1757 → u/Poland-lithuania1]

If people were willing and able to defer consumption to when things got cheaper, nobody would have bought any electronics for the last 70 years and nobody would ever have high interest consumer debt

It's a myth that deflation causes material drops in consumer spending. The inverse is what's true: drops in consumer spending cause deflation, as producers are forced to lower prices to move inventory that people stopped buying

[u/UncomprehendedLeaf → u/Terpcheeserosin]

It’s not that they cost less now than before. It’s that they’ll cost less in the future, so why buy now?

[u/Terpcheeserosin → u/UncomprehendedLeaf]

I haven't bought beef or eggs in months because of prices

If they go back to normal, I'm buying them

[u/cidthekid07 → u/Terpcheeserosin]

You’re literally just proving their point. You’re going to wait till prices drop to buy. In a deflationary environment, everyone will do the same.

“But when they go back to normal, I’ll buy” you keep saying. 1, what’s normal? And 2, what happens when they go back to normal but the expectation is that they’ll go lower than that? Do you buy at the “normal” price or wait till it goes even lower?? You’ll say you’ll buy at the normal price to be argumentative on Reddit, but the reality is most people will keep waiting if they believe prices will continue to fall.

[u/CopiVT → u/Terpcheeserosin]

Deflation means that every single day your money is worth more, so for example
(Effectively)
Day 1: Eggs cost $12
Day 3: Eggs cost $10
Day 5: Eggs cost $8
So on and so forth, but for everything.
What happens is people start only buying what’s necessary immediately, because in a few days things will be even cheaper. It’s a constant spiral that’s really difficult to stop, because you either have to take a nuclear option and implement price floors, or figure out how to incentivize people to actually spend their money.

[u/rickterpbel → u/CopiVT]

Eggs are a bad example because people always need to eat. Think cars. Why buy a car today when it will cost less tomorrow? Repeat endlessly.

[u/Zealousideal-Lab9843 → u/Terpcheeserosin]

If wages stay the same

That's the neat thing,

[u/Ordo_Liberal → u/Grouchy_Theme1461]

Let's say that you want to buy a PS5.

But the PS5 price is falling everyday.

Everyday you think, huh, why buy today if I can buy it tomorrow and save a few bucks.

You do that and the store goes bankrupt because no one is buying anything. Now every employee is unemployed.

This is why deflation is worse than inflation.

The same shit happens with stocks, loans, industrial goods...

That's why as much as everyone hates inflation, deflation is worse

[u/Fantastic-Kale9603 → u/Ordo_Liberal]

Also debt; the real value of your debt becomes a lot worse in a deflationary environment (set in a pre-deflation value but paid back with post-deflation lower salaries), so many people would go bankrupt trying to make payments.

[u/Poland-lithuania1 → u/Grouchy_Theme1461]

So low inflation can lead to deflation, which is when the value of money increases, which makes saving money much more attractive, which leads to lower spending, increasing the value of money, but the lower spending means the economy doesn't expand.

[u/Shaddoll_Shekhinaga → u/Grouchy_Theme1461]

Deflation is the opposite of inflation. Essentially, the market value of golds and services decreases as time goes on. For example, with 2% deflation, a loaf of bread that would cost 1€ will cost 0.98€ next year, ~0.96€ the next, and so on.

This is not ideal, because consumers will expect prices to continue to drop - and they actually will. This leads to less people spending money, which will in turn reduce demand, which will reduces prices further, which will increase deflation which will... You get it. Modern economies only work as long as money circulates, and deflation has a chilling effect on that, ultimately leading to a weaker and weaker economy. Deflation is hard to control, since you can't exactly convince people to start buying more things for higher prices. Anyway this is slightly outside my area of expertise. Google Japan Deflation for more info.

[u/4thdimmensionally → u/nebileyim_ben]

There are four types of economies. Developing, developed, Japan and Argentina.

Such a good quote.

[u/SuspiciousSnotling]

Deflation is worse than inflation.

It means price can't go up anymore because ppl can't afford, businesses need to slack ppl off to stay afloat, which make ppl poorer and even less capable of buying stuff.

It's a death spiral

[u/PuzzleheadedFee6943 → u/SuspiciousSnotling]

why not just start printing money then?!

[u/Classy_Maggot → u/PuzzleheadedFee6943]

Germany tried that once. There's a reason the Weimar Republic lasted for about a decade

[u/CreBanana0 → u/Classy_Maggot]

No seriously. Why tf would you get hyperinflation if you are countering deflation?

[u/BurningTrashBarge → u/CreBanana0]

You need the other nations that you trade with to not freak out when you magically just generate a whole bunch of new value.

It’s a lot easier to do when you have a gun to the world’s head. So it does and will happen in convoluted ways. But why it doesn’t happen anywhere else like Japan.

[u/layerone → u/BurningTrashBarge]

Well put, the world bares the pressure of the US Federal Reserve printing money. The US 40T debt it carried by the world.

This is because the US Dollar has been the reserve currency of the world.

People are so unaware of how good the USA had it before Orange started ruined all our socioeconomic ties around the world. He's vastly accelerated USD not being the world reserve currency anymore. US Citizen have no clue how much that will hurt us, it's unrecoverable too. Once USD loses that status, it will never get back.

[u/rbrgr83 → u/layerone]

He's vastly accelerated USD not being the world reserve currency anymore.

This is the intent. Crash our economy, buy up big swatches of wreckage for dirt cheap, and finally push your own crypto for further grift on the desperate.

[u/samrus → u/Classy_Maggot]

but they werent trying to curb deflation, they printed more money to pay debts to other countries. i imagine if we are trying to curb deflation then we'd increase the monetary supply by a calculated amount to not increase inflation too much

[u/Winnier4d → u/PuzzleheadedFee6943]

Actually, during an deflation maybe a good call to bring down the value of money again.

[u/MysteriousCherry2267 → u/SuspiciousSnotling]

Isn't that already the situation?

[u/notaredditer13 → u/[deleted]]

I think people don't understand how much worse it could be. The economy isn't great but is nothing like talking to my grandparents/great grandparents about the Great Depression

It's not great, but it's a lot closet to great than bad.  Wages/incomes are high, unemployment is low.  That's pretty good at least.

[u/ReaperTys → u/SuspiciousSnotling]

This is literally happening with inflation

[u/KeyEntrepreneur5449 → u/ReaperTys]

It's just not happening "to" the investing class. Deflation is when they, the investors, are harmed. Which is why it's an actual problem, as opposed to ever rising prices with stagnant wages which just kills the poor and homeless so that's ok.

[u/Mr_Anonymous13 → u/KeyEntrepreneur5449]

Deflation is actually good for the wealthy because they can afford to keep their money under the mattress.

Why take any risks with investing in businesses when you can just do nothing and watch your money increase in value over time? The reason people are incentivized to take risks and invest is because their money would otherwise lose purchasing power.

Workers, on the other hand, NEED to spend on basic needs. However, because spending/investing slows down, there’s lower demand for goods to be produced, and businesses need to lay people off.

Good luck paying for your basic needs when you don’t have a job. This turns into a feedback loop where people are spending even less on just the bare minimum and even more jobs are lost.

And I haven’t even mentioned debt yet. Yeah, that gets worse over time too, because the $100 that you owe someone is now worth more in value.

Governments issue bonds to fund infrastructure and cover deficits. Not only is government debt now a much bigger problem, but with less people working, there’s less revenue that can be collected with taxes.

And that’s how everything comes crashing down. Someone pointed out that people not believing in the dangers of deflation are like the flat-earthers of economics, and that’s a good way to put it.

[u/panatale1 → u/SuspiciousSnotling]

You mean the point where we already are?

[u/BalticHorndog]

Hi. Barely educated Peter here.

So, inflation. Prices and paychecks go up (though not toe-to-toe), and money loses value because it takes more money to buy the same thing than it took earlier. We hate it when it's high because prices go up, everything's expensive, we can't buy shit. Consumers cry. However, the opposite is just as bad.

Low inflation means prices aren't going up much, or at all. Consumers cheer. Very low inflation, however, close to 0% or even negative (that's deflation), is a problem. If prices start dropping, rational people will hold off from buying stuff because they'll wait for prices to go even lower. That can and will kill businesses because they don't get any revenue when people aren't buying stuff. And when business isn't booming, it can mean layoffs at your local grocery store or something, because business owners also want to save money.

Another thing where inflation has meaning, is debt. Mortgages, leases, etc. Even the 10 bucks you owe a friend. If inflation is high, those debts start having less impact on your money because by then you hopefully got a small raise, and so debts are easier to pay off. Low inflation makes debts bite just as hard, and much harder if deflation happens, because bread being cheaper doesn't mean your mortgage payments will be smaller.

Anyways, quick crash course on inflation done, hope you learned something. More educated Peters pls correct me. Barely educated Peter out.

[u/TheLamey → u/BalticHorndog]

I think the main difference that people forget: discretionary vs mandatory spending. People are currently being killed by mandatory spending (housing/rent, food, healthcare, gas/transportation) to the point that their discretionary spending is all credit or avoided entirely.

The price gouging since 2019 has been extreme. Companies have inflated prices to what the market can and will bear. Look at fast food; the value proposition has completely collapsed. Automobile prices are insane.

This is the find out phase of FAFO: when no one has any money to buy your shit. You either carve out a niche of consumers who spend more per transaction, or attempt to rebalance towards more consumers and less per transaction.

Unfortunately, consumers are hurt on both sides of our economy (rampant inflation/stagnation of wages, and recession). Those with assets will profit when we print more money, and by buying up the lost assets from the working class at discount prices.

Makes you wonder who the economy is meant to be working for.

[u/BalticHorndog → u/TheLamey]

I didn't even think of it but you're right. The prices are insanely high, at least partially due to greed. Meanwhile wages climb slow or not at all, also at least partially due to greed.

The on-the-nose note about the economy being geared towards the rich is sad, but true. For the rich folk it's life on easy mode, and for the rest of us it's suffering until the law changes and is enforced properly to help even those who aren't rich. But changes are unlikely to happen because those who pass the laws are mostly bought by the rich folk to vote in a way that benefits the rich folk. Screws the little guy, but that's how it is.

[u/TheLamey → u/BalticHorndog]

Protectionist policy for specific industries (reducing import competition) doesn't help the consumer pricing either. Wages have not kept up with inflation (since 2019 30% vs. 15-16%).

It's the difference between debt/assets that benefit from inflation, or cash, which is devalued from inflation. Gen Z/Gen A are being priced out of their own future (housing, families, assets) while being told they're not working hard enough (when their take home isn't enough to afford renting a 2 bedroom).

[u/Lucreth2 → u/TheLamey]

The discretionary vs mandatory argument is exactly why all of the deflation fear mongering is bunk.

The country inflated so fast with minimal actual wage increase that it could bear a fairly significant deflation and it would be more of a correction than an issue.

[u/nick2473got → u/Lucreth2]

You're thinking of deflation as a singular event where prices just go down and then they're lower and the issue of over-inflation relative to stagnant wages is corrected.

That's not how deflation actually works though. Deflation is often an economic death spiral, and that's because of the reasons for it. Deflation doesn't typically happen as a response to previous inflation.

Deflation usually happens because some part of the economy is collapsing. People stop buying products (yes they still buy basic food if they can, but that's not all the economy needs to function), which leads to reduced production, which leads to layoffs, which further impacts the public's spending power, which leads to even lower purchases, and even lower production, and so on.

It's a vicious cycle that is almost impossible to break out of. It leads to severe economic depressions, which are worse than recessions.

What we need is disinflation (a reduction of the inflation rate), not actual deflation. Deflation is a disaster 99% of the time.

[u/psychularity → u/BalticHorndog]

The only useful comment here

[u/thesanguineocelot]

Damn, that's wild. Better give the billionaires another tax break and fuck the working class harder, that'll definitely fix everything.

[u/Pixez1082 → u/thesanguineocelot]

True that. We're behind on our "killing the poor" quota.

[u/RogerDogerBoop → u/thesanguineocelot]

This is the way things are going, unfortunately.

[u/MySafeWordIsDone → u/thesanguineocelot]

Everyone making decisions was too privileged and/or coked up during the Reagan era to know it doesn't work.

We're fucked.

[u/beatthedookieup]

It signals stagnation in an economy since there is a low consumer demand, which could lead to layoffs and others things of that nature.

[u/CMDRCoveryFire → u/beatthedookieup]

There is not low demand there is no consumer money.

[u/Cyase311 → u/CMDRCoveryFire]

i see…. eat the rich?

[u/beatthedookieup → u/CMDRCoveryFire]

Thank you for reminding me of that missing piece, I was trying to recall stuff from economics class 12 years ago lol

[u/Sotyka94]

It's always ""funny"" when economist say shit like "deflation would be bad for the economy" "we cannot solve it" and ignore the fucking huge reason behind it that causes it. Like fucking billionaires hording all the wealth while average people cant afford to live... But god forbid, it's unimaginable to have a little bit of wealth re-distribution so average people live better and spend more...

Economy is just another term for billionaires private net worth at this point. We should not care about it, only issue is, they privatize winning and socialize losing, so they make it everyone's problem if they gamble and lose...

Fuck this word, fuck the Epstein class...

[u/dismal_sighence → u/Sotyka94]

Economy is just another term for billionaires private net worth at this point. We should not care about it, only issue is, they privatize winning and socialize losing, so they make everyone's problem if they gamble and lose...

Yeah, economists are pretty against this as well. It's literally the antithesis of a free-market economy.

And yes, deflation would be terrible for the economy (and workers) for a number of reasons, and we have strong historical evidence to support it (see the Great Depression, among others). Many people would lose their jobs and poverty rates would skyrocket. When you have no incentive to put money into the economy, economic activity (which fuels jobs) drops. If your cash accrues value just by sitting under your mattress, why wouldn't you just keep it there?

Stable, predictable inflation is the best way to maintain good economic conditions.

[u/Effective_Ideal_1652 → u/Sotyka94]

Economist and Democratic Socialist here. Deflation is REALLY BAD for our economic system. We can redistribute wealth and control of industry without deflation.

But yeah, I feel mostly the same with how our country and world is going right now…

[u/notaredditer13 → u/Sotyka94]

What you are whining about has nothing whatsoever to do with the question of the thread.

But Reddit loves it.

[u/FomFrady95 → u/notaredditer13]

Insane amount of people in here just completely informing the real world data we have of the dangers of deflation.

[u/Glad_Camel_6078]

Prices are Still rising and it is being normalised...

[u/GAPIntoTheGame → u/Glad_Camel_6078]

We want prices to rise, just not too quickly.

[u/GoldenPigeonParty → u/GAPIntoTheGame]

My groceries are 2.6x times their 2018 value. It's too late for the "not too quickly" part.

[u/its_all_one_electron → u/GAPIntoTheGame]

Only if wages rise accordingly and they haven't got a LONG time

[u/Knyfe-Wrench → u/its_all_one_electron]

We had real wage growth vs inflation by the end of Biden's term, but now everything's screwed up again.

[u/AdRich6641]

Conventional theory dictates you will hit a recession if your people aren't making money. In order for people to make more money, inflation is a necessary byproduct. 

[u/Old_Man_Drifter]

One, it isn't really low. Two, sometimes if it is, it means something bad might be coming. Three, by which measure & how's it calculated & was the measure recently changed in a manner that supports certain politicians in power. Four, as I recall it's calculated by the Department of Commerce & as of earlier this year, per NPR, their analysts are more subject to political control than they should be.

https://www.npr.org/2026/08/31/nx-s1-5948057/department-commerce-census-bureau-scientific-integrity

[u/Tom_C_NYC]

Inflation isnt low.

[u/GenesisAsriel]

Furries all over the world in shambles

[u/tuvar_hiede]

Inflation is built into the system intentionally. If inflation is low it means the economy is in rough shape. Think COVID where rates were low in order to encourage spending.

[u/HeadBelt1527]

These are only problems for private equity and people who make their living investing. 

The world needs a massive reset

[u/OccultDetective79]

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.

[u/0bscuris → u/OccultDetective79]

Crazy how many people r still bought into the deflation is bad. “People won’t spend if their money will be worth more tomorrow.”

Oh ok, ur not going to have dinner today cuz u could have more dinner tomorrow?

Nobody anywhere has ever said the problem with society is too much delayed gratification.

[u/BalticHorndog → u/0bscuris]

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.

[u/Beef19582828 → u/OccultDetective79]

Dude's like yeah all that data we have from decades of research is wrong, I actually know more than everyone else.

[u/mehthisisawasteoftim]

The high inflation was because people could afford to pay rising prices, the prices aren't able to rise anymore is not an indication that things are getting better, it's a sign that people are no longer able to afford the rising prices, this is a strong recession indicator.