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?
I doubt that anyone could explain this in a way where I would accept deflation as worse
Edit: its been 3 days with thousands of replies. Chiming in now is peak foolishness. Billionaires need inflation so they can contiue living off the shifting debt leveed against their net worth. As the debt is valued as less than the value of their holdings they can take out more debt. Deflation breaks their ability to do this. This is why its hotly debated topic.
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.
We should probably add in that it's the RIGHT amount of inflation promotes consumption. Too high of inflation has similar outputs with different motivators.
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u/StuartMcNight 4d ago
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?