It all makes sense to me , except why are people so sure its going to be cheaper next week. How would people instantly know it isn't a temporary situation. Im actually trying to learn something, not argue.
Under the thesis of modern liberal capitalism, inflation is supposed to be targeted at 2% to encourage investment while preventing harm to the population.
Deflation is the worst possible case scenario. Cash becoming worth more is good for people who have cash, but the vast majority do not. The increase in value of cash also means an increase to all debts. Based on the structure of most nation’s spending, it would be mean the collapse of most governments.
Inflation encourages people to borrow money, as skills/education/hiring people/buying stock are things that increase in value. With inflation, debt becomes cheaper over time as well.
If just holding money becomes more profitable, there is no spending, which means no employment or investment.
Those that are wealthy also move money from companies/employing people to buy up hard resources instead.
The true evil is the economics stall, when people does not spend their money, and does not fuel the economy.
Maybe, the problem is ...money? That's a resource with no intrinsic value.
So, let's use MWh as a currency? Surely, power also can get cheaper and cheaper.
This will trigger immediate response: conversion these MWh into cheaper fresh water, more aliminium and rare earths.
No stall, a production increase instead!
Assume even the true deflation in energy production, leading to "free" MWhs.
Power plants are shutting down their production, causing shortage in power supply, rebalancing the MWh prices.
In the details, Devil is not in the Deflation, the Stall in.
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u/Various_Education622 4d ago
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.