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0 pointsseanmcdirmid1y ago0 comments

> messaging is hard when prices never went down…

The opposite of inflation (when prices go up), deflation (when prices go down) is never a good thing. But explaining that a bit of inflation is a good thing is something all economists agree on but most normal people can't understand. The fact that velocity should always be positive, and that "lower inflation" means lowering the rate of price growth, not deflation, is also something they don't get.

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roenxi1y ago

I doubt all economists agree on that because it is obviously not true. For example if there was a period where the CPI dropped combined with increasing wages across the workforce, that'd be pretty great for most people.

Deflation, in the abstract. is about as good or bad as inflation. Slightly better because a serious deflationary crisis is much less damaging than an inflationary one. You go to https://en.wikipedia.org/wiki/Deflation#Historical_examples and it is a whos-who of countries who then went on to be successful and prosperous and a few TBDs in the 2010s - there might be examples of catastrophic deflation but they haven't made it to Wikipedia yet.

seanmcdirmidOP1y ago

Deflation is universally considered bad, I don’t think there are many economists, if any at all, who think it’s a good thing. The problem with deflation is that everyone stops consuming in hope of better prices, like Japan, and the way they dig out of deflation is via artificially inducing inflation. It is definitely an easier problem to solve than excessive inflation, but deflation usually underlines a bigger problem with the economy.

roenxi1y ago

> The problem with deflation is that everyone stops consuming in hope of better prices, like Japan...

May as well say the problem with inflation is people stop consuming because things cost more, like Tuvalu. You've picked a random high performing economy and claimed that its existence shows that people buy less when prices drop (an exotic claim). It is an unusually weak argument because it contradicts basic supply-demand logic and you've put your fingers on no evidence.

One of the reasons democracy works so well is that voters ignore that sort of unsupported just-so economic mumbo jumbo and vote for change when their living standards drop. It isn't a great algorithm but it is a lot better than the alternatives.

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bdangubic1y ago

The opposite of inflation (when prices go up), deflation (when prices go down) is never a good thing

so if we have high inflation say due to global pandemic's effects on global supply and in response we get say 40-100% price increases (say milk was $1.00/gallon and now it is say $1.50/gallon, a modest 50% increase).

so now inflation eases, global supply chain in back to normal etc etc... we should expect now that milk prices will stay forever at $1.50/gallon (or higher) because now that would be deflation if the prices eased…?! :)

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roenxi1y ago

seanmcdirmidOP1y ago

roenxi1y ago

> The problem with deflation is that everyone stops consuming in hope of better prices, like Japan...

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bdangubic1y ago

The opposite of inflation (when prices go up), deflation (when prices go down) is never a good thing

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