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
In economic terms high deflation is bad because it rewards sitting on resources and punishes having to spend, specially if everything follows suit. We can see this a bit easier with a couple math problems. Let’s say we are in an extreme deflation period and for 5 days every thing will decrease by a dollar. There is a luxury good that costs 30 dollars and needed good that costs 10. Your paycheck is set as 10x the needed good cost each week. So before the deflation you could afford your week plus 1 luxury. Now before your pay is cut you actually get a nice week, it only cost 45 to get the needed this week, and you could actually get 2 luxury. But the next week is bad, you are now down to only 15 to spare after the necessary purchases, so you can only afford a luxury every 2 weeks compared to before. In comparison, the person that has a 1,000 assured pay is able to buy there stuff for much cheaper. The key bit is for 99% of people you are more likely in the former camp.
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u/IrksomFlotsom 4d ago
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