I remember watching a leftist streamer who understood Modern Monetary Theory and for some reason, they explained that deflation is actually much scarier for an economy.
Not that I believe any shitcaking of China from MSM, but just to counter some people in here saying deflation is good.
I gotta find it cuz I can’t explain it myself 🥶
…I could not find it but thank you intelligent comrades for coming to my rescue ily
It’s because of debt: when there’s lots of deflation (and when there actually is deflation and not just one particular good getting cheaper), the value of what’s owed increases far beyond what was gained by taking on the debt in the first place. That can lead to things like debtors being unable to pay back loans if the deflation means they’re not making as much as before.
A good example that I remember from one history class or another (I remember it specifically because the test on the material got it wrong, and the dipshit teacher thought it was about inflation instead of deflation and I’m still pissed about that 20 years later) was farmers in one of the decades of the late 19th century being hurt by deflation because all their machines and supplies were bought with debt but the value they could get out of the crops was suddenly worth less than what they owed for growing those crops in the first place. Which, uh, actually seems relevant now, depending on the economics of farming in China.
Which is just the thing, given that the largest banks in the world are just owned by the chinese State they have a much easier time dealing with a deflationary pressure than just about any other economy in the world.
Rapid deflation is bad, because it encourages people to save money because it will be worth more later, instead of spending or investing it to put it in to the market, which can cause a collapse of demand and a currency crisis.
Food prices on their own going down is not an issue, however, an deflationary crisis would make it difficult for other countries to borrow yuan because their debt would not only grow in interest but also in deflationary percentage. However, it might also encourage countries to start holding reserves of yuan because they will grow in value. The problem is in the modern economy everything operates through the former, not the latter.
That said, we know that is not the issue because it is just the consumer index pricing that is going down, they aren’t reporting on the yuan itself being deflationary.
I remember watching a leftist streamer who understood Modern Monetary Theory and for some reason, they explained that deflation is actually much scarier for an economy.
Not that I believe any shitcaking of China from MSM, but just to counter some people in here saying deflation is good.
I gotta find it cuz I can’t explain it myself 🥶
…I could not find it but thank you intelligent comrades for coming to my rescue ily
It’s because of debt: when there’s lots of deflation (and when there actually is deflation and not just one particular good getting cheaper), the value of what’s owed increases far beyond what was gained by taking on the debt in the first place. That can lead to things like debtors being unable to pay back loans if the deflation means they’re not making as much as before.
A good example that I remember from one history class or another (I remember it specifically because the test on the material got it wrong, and the dipshit teacher thought it was about inflation instead of deflation and I’m still pissed about that 20 years later) was farmers in one of the decades of the late 19th century being hurt by deflation because all their machines and supplies were bought with debt but the value they could get out of the crops was suddenly worth less than what they owed for growing those crops in the first place. Which, uh, actually seems relevant now, depending on the economics of farming in China.
Well its only a problem if you produce food to make money. If you produce it to feed people it’s less of an issue.
Which is just the thing, given that the largest banks in the world are just owned by the chinese State they have a much easier time dealing with a deflationary pressure than just about any other economy in the world.
Rapid deflation is bad, because it encourages people to save money because it will be worth more later, instead of spending or investing it to put it in to the market, which can cause a collapse of demand and a currency crisis.
Food prices on their own going down is not an issue, however, an deflationary crisis would make it difficult for other countries to borrow yuan because their debt would not only grow in interest but also in deflationary percentage. However, it might also encourage countries to start holding reserves of yuan because they will grow in value. The problem is in the modern economy everything operates through the former, not the latter.
That said, we know that is not the issue because it is just the consumer index pricing that is going down, they aren’t reporting on the yuan itself being deflationary.