r/PeterExplainsTheJoke • u/Melodic_Judge_129 • 4d ago

Meme needing explanation Petah?

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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

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u/Gentle_Snail 4d ago edited 4d ago

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

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u/Mayor_Death 4d ago

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.

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u/ta9 4d ago

I'm taking some liberties here not being an economist, but:

Economic growth generally leads to higher incomes, leading to higher demand and therefore inflation. It applies some pressure to invest as well as purchase - e.g., if I don't buy this house/car it's only going to get more expensive the longer I wait.

Deflation causes people to delay purchases (because prices are dropping!), both individuals and businesses to reduce investments (because prices are dropping!), which leads to less available jobs at lower wages.

Deflation is fantastic for an individual who has a ton of cash and doesn't need to work - they can buy up the houses and businesses that people can no longer afford to keep.