While deflation sounds good, its is definitely bad. When prices are falling, this provides an incentive to firms and consumers to delay purchases since prices are expected to be cheaper in the future. This reduces aggregate demand, which means goods get cheaper due to less demand, causing firms to have to fire people due to lower, causing greater economic decline that spirals out of control. We now know that deflation was a primary cause of the Great Depression.
Neither one of those is true. So long as it is not extreme, a decline in the price of goods means consumers have greater purchasing power, more financial security and hence more flexibility in their spending and saving. All of these are good for the economy as an aggregate.
Except your debts start increasing even while you're continuously paying them off and investment becomes much more lucrative.
Deflation benefits those who have a lot of capital and can invest it into ~ zero risk instruments like government bonds the most (e.g. that's basically how the rentier/aristocratic class in the 19th Britain were able to maintain their lifestyle without doing anything productive, government bonds were yielding 4-5% while the value of their capital was going up due to near continues deflation throughout much of the century).
On the other hand if you're a heavily mortgaged farmer you were basically screwed if the price food went down (that's why free-silver/loose monetary policy was so popular amongst farmers back in the 1800s in the Midwest and in much of US).
Let's say the price of everything goes down. And let's say you owe money when it does. Now everything is cheaper (including your labor, because the price of everything went down), but you still owe the same number of dollars. That hurts.
And if you say "wages won't go down", then you're expecting that everything else goes down (including the price of whatever your employer makes), but your wages magically won't? It would be nice... but don't hold your breath.
but that would only happen under monetary contraction, and the norm now is monetary expansion which siphons off money from savers and redirects it into the pockets of asset holders and "Cantillionaires", and this also means you get paid less with a static wage unless you get raises which for many people is hard unless they're constantly job searching which sucks anyway
This logic doesn't work. The past few decades have seen steady to strong inflation, while purchasing power after adjusting for inflation, depending on the country, has either not kept up with it or has straight up gone downwards. So in other words, the price of everything has gone up, but not wages. So I don't really see how the price of everything going down would mean wages going down either.
When prices rise, we'd expect revenues to rise, which is not necessarily given back to workers in the form of buying power. (See grocery stores having record profits as prices have rised, for instance - that increase in profits is probably in part the gap between prices and wages showing up.)
However, no company is going to do that the other way around - if their revenues fall, they will either cut wages or fire people in order to still be profitable, so deflation should show up faster in loss of buying power too. Companies don't generally just accept lower profits, and shareholders especially do not accept this.
> So long as it is not extreme, a decline in the price of goods means consumers have greater purchasing power, more financial security and
Deflation means that people's debt becomes more of a burden. I'd hazard to guess that poor people have more debt that rich, and so deflation would be worse for the poor.
but debt actually having a bite cuts both ways and bad businesses should be on the hook for their debts, and middle class people who carefully save over their entire life deserve to not have their savings inflated away or otherwise forced to invest in businesses to preserve or grow the purchasing power of savings
Regardless of what one thinks about deflation in general, deflation TODAY in the United States would be extremely bad(due to the debt load). That said, you should obviously want the "cost per unit of X" to be deflating. dollars per teraflop should always be falling. dollars per kilowatt hour should always be falling.
Except we really need deflation. A dollar today is 2.6x less than a pre-2021 dollar. People can't afford homes anymore, and it's not entirely because of the interest rate, but because everyone's home has doubled in price since 2020.
The market is locked up. How many families are making 133k+ a year to make the 3x rule for a 400k tiny townhome? The US Census reports the average household income is 75k.
The Feds and Deep State have played with people's lives for too long, pretending like they can offer security and order. In reality, they've screwed over the middle class.
