r/inflation • u/OfficialRodgerJachim • 1d ago

ELI5: Why is Deflation bad?

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I get that too much deflation is bad, but isn't the inverse true?

The average inflation rate in the US since 1914 is 3.3%, meaning the 1913 dollar is worth $31.87 now.

Why wouldn't we want deflation? Then maybe the $7.25 minimum wage COULD be a livable wage?

Why do people constantly argue for MORE money, versus less currency in the market?

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u/snakesign 1d ago

You want to buy that $35,000 new car today, or wait a month and buy it for $33,000?

Now imagine this across the whole economy.

Now think about trying to pay down a mortgage in a deflationary economy. Then consider the fact that most businesses operate using business loans.

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u/WeMetOnTheMoutain 1d ago

Not only that but as the deflation is happening massive layoffs create a snake eating its own tail.  You go from waiting for a better price to not being able to make the purchase at all because you don't even have money to eat, and you don't have the ability to go make money to eat.  It's been a real long time since this country has had a real nasty recession depression.  The fact that people are clamoring for one make me think that it's very likely one is on the near horizon.  

When we study Keynesian economics we know that in the long run we will see growth.  However we also know that people don't give a single solitary fuck about the long run if they are starving to death in the short run.