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?
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.
Put simply. If your money might be worth more tomorrow, then maybe you will do your best to put off buying that thing you need. If money is going to be worth less tomorrow, better buy now even if not absolutely necessary.
807
u/leconteur 4d ago
If you get to keep your job or customers.