The popular idea that prices should fall to previous lows gives most economists chills. Deflation is bad for everyone, they say.
All I read is, “We’ve enjoyed record profits for these past few years, and we want to continue to enjoy record profits for years to come. Any change to that is bAd FoR eVeRyOnE.”
The prospect of falling prices encourages consumers and businesses to put off purchases because they will be cheaper if they wait, sucking money out of circulation in the economy.
LOL, what??? You mean to shop sensibly, rather than buy on impulse, is a bad thing?
The gaslighting going on by economists and corporations is out of this world.
The problem is that when everyone is “shopping sensibly” then people lose their job because there’s no demand for whatever product sale their job depends on. That goes for pretty much every sector.
Macroeconomics isn’t as simple as you seem to think.
Capitalism is unsustainable. That’s the heart of the matter.
People should be shopping sensibly, buying what they need at a price they can afford.
Any other form of spending is likely driven by pressure tactics that are harmful to individuals.
If there is demand brought on by true need, the sales numbers will remain the same.
And to your point, impulse buying today also means you aren’t spending tomorrow, in effect creating the same “problem” as shopping sensibly.
There’s a difference between looking at the price of things and buying what you want/need if you’re comfortable with the price VS the situation during a deflatory period where you look at the price, you’re comfortable with it, but you know it’s not an absolutely necessary purchase so you figure you’ll just wait because the price will be coming down some more.
One of the two leads to people losing their job as demand crashes as people expect prices to go down.
If people only buy what they need and not what they want then I hope you have a plan for all the people who suddenly won’t have a job. We don’t need many things in life and we produce more than enough of it for everyone already… So, what do you do with the pool salesman or the network tech that works for Valve now that their job is unnecessary because people don’t buy stuff they want anymore?
Heck, you wouldn’t be here giving lessons on capitalism and wants vs needs if you followed what you’re preaching because you wouldn’t have whatever device you’re using to type on.
Again, this problem only exists because capitalism requires rampant spending with no breaks. It’s a failed system that should be corrected.
History has seen shifts in consumer buying patterens, and entire industries go under. You know what else happens? Other industries come up, and jobs change.
If industry isn’t adaptable, then the result will be failure. Can’t blame someone else for not keeping their unsustainable business model afloat.
Again, this problem only exists because capitalism requires rampant spending
No. There is nothing about private ownership of capital that requires rampant spending. Hell, us in Canada are especially good at allowing capital to sit idle.
It is our debt-based economy that requires rampant spending.
Financial planner here. Deflation is bad for “everybody” that wants to talk to you about it. It’s bad for financial planners because it makes the stock market go down, so we make less money. It’s bad for politicians because everybody that votes seems to think the economy consists of however high the Dow Jones gets. It’s bad for companies because it’ll cut into their profits. The more these entities can convince you that deflation is bad, the more likely people are to campaign against it.
The real truth of it is that deflation is good for PEOPLE. People are not the economy. The concern I have is that during a deflationary period companies tend to do more layoffs and cut corners on quality control. As long as income & unemployment stay the same then deflation would be a very welcome reprieve from these last couple of years.
This is why the union strikes are so important right now. If people see that the current union strikes work, then they’re far more likely to unionize when companies start to do layoffs. Really the only way for companies to protect themselves from deflation is to screw over the workers, and unions stand in direct opposition to that move.
The real truth of it is that deflation is good for PEOPLE
Deflation encourages businesses and people to hold on to their money instead of spending it. One person’s spending is another person’s income, so when spending goes down so do incomes. When people’s incomes go down, they reduce their own spending in response. This is a vicious cycle that leads to a lower standard of living.
Don’t believe me? It is what happened to Japan since the 1990s after their real state bubble exploded. It is called “the lost decades” and it was very much felt by the population.
Fair. The 2% inflation that the FED is pursuing by raising rates is because that’s the economic sweet spot. If we end up in a 10 year deflationary period then that would be catastrophic. I was moreso referencing a short term “return to 2019 numbers” type of deflation that I believe could be a good thing for people.
Since the FED is focused on a 2% inflation hedge and we’ve raised interest rates so much, they would just lower them again to prevent a repeat of Japan. They’re predicted to lower them next year because of this.
If we end up in a 10 year deflationary period then that would be catastrophic I was moreso referencing a short term “return to 2019 numbers” type of deflation that I believe could be a good thing for people
Are you saying that a 2%-ish deflation rate sustained for ten years would be catastrophic, but a return to 2019 prices would be a good thing? On what sort of time period would that be beneficial?
Because the accumulated inflation since 2019 is somewhere around 20%, and if we correct it over ten years that would approximately match the scenario you deemed as catastrophic earlier.
Since the FED is focused on a 2% inflation hedge and we’ve raised interest rates so much, they would just lower them again to prevent a repeat of Japan
Well, that is what Japan tried to do and it wasn’t enough. The problem is that in the real world you can’t lower interest rates beyond a certain point, because as interest rates approach zero or even negative values (ZIRP), banks find it very difficult to make a profit from lending, which leads them to bankrupcy, which in turn slows the economy down, which is the opposite of what you are trying to achieve. Not to mention that on the way to ZIRP private debt balloons and when interest rates eventually revert to their mean the debt burden becomes unbearable, which leads to a recession.
In other words, macroeconomics is a tricky unstable system and simplistic takes have poor outcomes.
I think if you extrapolated from 2019 with a 2% inflation rate extended to 2025 or 2026, and managed to intersect with that, it would be kind of good, but I don’t know if you can without some harm somewhere. You have a very real disruption in the pandemic, followed by a large land war in Europe.
However you cut it, there is some pain to be spread around. It just seems that the Billionaires won’t be feeling any of it.
Still, a “soft landing” still might be kind of do-able, I wouldn’t be adverse to a few years of 1% inflation in the CPI with 2% pay raises. But macroeconomics is hard at the best of times. Hey, how about those housing costs?
Well given we have limited resources and climate change is causing a lot of issues, we really should stop growing the economy and creating more inflation, because we’re going to see widespread deflation over the next few decades. Everything we build up now will come back down, as we refuse to build for the new world & cling to the old one.
Always pointing the finger at people, consumers, average citizens, middle class individuals and governments about what they should or shouldn’t do about the economy … and the expert never addresses the big fat white elephant in the room … CORPORATE GREED and how companies basically took the opportunity of a world in panic to raise prices, make profit and tell people it was due to a global emergency.
Now it’s the same old sales job as old as time … a loaf of bread originally costs $1 … company raises price to $5 … people complain … company lowers price to $4 and everyone thanks the company for lowering prices.
Just skimming off CEO bonuses and cutting those profits to their shareholders would probably be enough to bring back prices to what they were before … but no one ever wants to talk about what companies are paying themselves or giving to their shareholders … in political talk and talking points from economists and financial professionals - that’s sacrilegious
They took all the money out of people’s pockets and now they complain people can’t buy shit. Fucking smooth brain thinking by corporate greedy assholes.
They took all the money out of people’s pockets and now they complain people can’t buy shit
They are also laying people off, downsizing ang offshoring jobs.
Who do they expect to still be able to buy their shit when they have no income?
Was this article written by an insane person?
the current Goldilocks state of the North American economy
What?!
Much of this conflicts with the view, widely expressed in some form by commentators and political leaders of all stripes, that Canadians will benefit if the prices of things like groceries and houses would only go back to the levels they were at in the good old days, say, before the pandemic, so that people could afford them.
…
so that people could afford them.
🤯🤯🤯
No shit?
The thing is we all wish that prices would come back down, but prices might be lower, you still can’t afford what you want to buy if you lose your job or your salary goes down.
Im not worried about falling prices.
Are you worried about losing your job?
Most of these worries are of long term deflation. If deflation is temporary and is perceived as “prices going back to normal”, as it is with cars and GPUs, I don’t think most of these worries would manifest. People aren’t holding off on buying a car because they think car prices will continue to fall long term.
It should be noted, however, that there are many ways in which deflation actually helps the rich more than the poor. Since money is worth more over time, it favours those who already have money. Conversely, inflation can surprisingly help the poor by making debt worth less.
But this assumes that rich people aren’t the very ones profiting off of inflation by price gouging, rent seeking, and manipulating the market, which they absolutely are. So I very strongly doubt that short term deflation hurts the poor and working class.
inflation can surprisingly help the poor by making debt worth less.
What kind of poor person is being extended credit? That would be lender suicide. Debt is a tool of the rich.
Poor people have tons of debt. Student loans, credit cards, car loans, rent-to-own furniture/appliances, pay day loans, medical debt in the US and recently installment purchases online. A lot of these are definitely extended to poor and lower middle class people.
