Prices didn’t go back down.
That’s deflation, and is actually really bad for society and the economy overall.
Honestly, more workers need to unionise and restore wages to where they should be (pegging back to rates in the 80s - 90s), minimum wage should be closer $25/hr.
If real wages continue to rise higher than CPI for blue/white collar workers, rather than the capital class - things would be a lot better overall.
China recently deflated and is still having problems. It’s incredibly dangerous because it causes a negative feedback loop. Prices go down -> people wait to get a better price on something -> prices sink further -> people wait longer -> your economy starts stalling out and going into a nosedive.
Nobody wants to be the chump holding the bag if they buy an apartment for $50k and it drops to $20k in the next five months. :/
If deflation worked, everyone would be doing it, and we’d still be using half-cent coins just like the family in Little House on the Prairie did. (Which would kinda be awesome, I’d love to pay a half-cent for an orange.)
one of the really big problems with deflation in a system like the one we currently have is that there is no way to set a “negative” interest rate, at least trivially. So if something spicy happens, and you spiral down to a really aggressive negative interest rate, everything explodes instantly.
This is actually why we target a 2-3% interest rate, and in the times of financial struggle (globally) use it to create new money in order to stimulate an economy, which in turn raises inflation significantly, but beats another literal depression.
The primary difference between the great depression is that covid was significantly worse, and that modern monetary policy is incredibly resilient compared to back then.
you could theoretically have a system with deflation, but then the problem is that you have very little money moving through the market, and arguably you will move away from a currency based market, to a goods based market instead, which is quite literally a bad thing.
Deflation is actually bad because it would be an incentive to keep rather than spend money as its value would just increase by itself.
News flash, most Americans were paycheck to paycheck before inflation, too.
“I’ve turned off the oven, yet food is still burnt”
“Inflation” to economists is how much the price is going up this month.
“Inflation” to most people is how much stuff costs.
It feels like there needs to be some acknowledgement of that when this is all talked about, after the superinflation of 2022. The goal should be that prices go back down, not that they go back to going up by 3% per year now that they’re way up high.
You really don’t want deflation. The correct thing now is for wages to go up to match the new costs and this has been happening.
That’s not really true though. The only way to maintain infinite inflation is with infinite growth. But we only have finite resources. We also have modern examples of countries that experience deflation and they aren’t the horror shows that the finance industry wants about. For example, Japan.
The only way to maintain infinite inflation is with infinite growth
No - monetary policy also effects inflation. See also “stagflation”.
We also have modern examples of countries that experience deflation and they aren’t the horror shows that the finance industry wants about. For example, Japan.
It doesn’t have to be a “horror show” for it to be “bad”. Japan’s “lost decades” are hardly desirable.
Deflation would mean money is worth more. Great! But then prices drop. And then salaries drop. And now the ability for somebody to pay back a 30-yr. fixed mortgage gets harder over time rather than easier as it does in an inflationary environment.
So yeah - I’d rather a pay rise to match (or hopefully exceed) inflation that makes it easier for me to repay loans.
They’ll keep waiting too. Because without some shock therapy like raising min wage to like $25 an hour overnight and taking that economic hit it’s never going to get any better. This is the new normal until that happens.
