Just want to note here that inflation going down doesn’t mean the prices will drop. It only means they stop increasing or the increase slows down. For prices to go down we’d need to be experiencing deflation which is incredibly bad for the economy.
When people talk about “the economy” they almost always mean Wall Street. That has less and less to do with the economic environment that those of us outside of the 1% live with every day.
Lower prices are bad for “the economy”, but they are often good for the vast majority of us. We aren’t the ones who benefit, even indirectly, from businesses making more money.
Well, that’s a very U.S.-centric perspective, but no, I’m not talking about Wall Street - I’m talking about the economy as a whole. Deflation means the value of money is increasing, which discourages people from spending since their money will be worth more tomorrow than it is today. This hurts businesses across the board, creating a deflationary spiral where reduced spending leads to lower revenues for businesses, forcing them to cut costs, lay off workers, or close entirely.
As businesses suffer, incomes decline, further reducing consumer spending and exacerbating the cycle. Making big purchases is particularly disincentivized because waiting a year or two means you can get them cheaper. What’s good for the economy is people having money to spend and actually spending it, but deflation disrupts this balance.
That was a US-centric perspective, although I think it applies more generally. What you’re talking about is classic economic theory, which was a pretty accurate picture in the past. More recent developments suggest that some important things have changed in the actual economy over the last half-century, which have been reflected in new economic theories.
The central problem is that businesses are no longer as sensitive to traditional market factors. Monopoly, collusion, and the capture of regulatory functions have allowed businesses far more control over both their markets and their labor costs. Meanwhile, wealth inequality has drastically reduced the amount of discretionary income that is available. The traditional economic model still mostly applies to the wealthy and what’s left of the middle class. The majority of consumers no longer have the means to participate as they did.
Neither inflation nor deflation address wealth inequality. The relationship between salaries and prices is broken. Traditional economic indicators assume that businesses doing better means the average person does better, but that is no longer the case. Most of the gains now go to wealthy investors. That leaves us with a situation where the traditional economy looks great, but large numbers of people can no longer afford housing or food. Unless you are part of the 1%, that is not really a good economy.
The only thing that would cause deflation is innovation or reduced demand, and there’s not a lot of innovation in food, and everyone but anorexics seem determined to eat.
Just want to note here that inflation going down doesn’t mean the prices will drop. It only means they stop increasing or the increase slows down. For prices to go down we’d need to be experiencing deflation which is incredibly bad for the economy.
When people talk about “the economy” they almost always mean Wall Street. That has less and less to do with the economic environment that those of us outside of the 1% live with every day.
Lower prices are bad for “the economy”, but they are often good for the vast majority of us. We aren’t the ones who benefit, even indirectly, from businesses making more money.
Well, that’s a very U.S.-centric perspective, but no, I’m not talking about Wall Street - I’m talking about the economy as a whole. Deflation means the value of money is increasing, which discourages people from spending since their money will be worth more tomorrow than it is today. This hurts businesses across the board, creating a deflationary spiral where reduced spending leads to lower revenues for businesses, forcing them to cut costs, lay off workers, or close entirely.
As businesses suffer, incomes decline, further reducing consumer spending and exacerbating the cycle. Making big purchases is particularly disincentivized because waiting a year or two means you can get them cheaper. What’s good for the economy is people having money to spend and actually spending it, but deflation disrupts this balance.
That was a US-centric perspective, although I think it applies more generally. What you’re talking about is classic economic theory, which was a pretty accurate picture in the past. More recent developments suggest that some important things have changed in the actual economy over the last half-century, which have been reflected in new economic theories.
The central problem is that businesses are no longer as sensitive to traditional market factors. Monopoly, collusion, and the capture of regulatory functions have allowed businesses far more control over both their markets and their labor costs. Meanwhile, wealth inequality has drastically reduced the amount of discretionary income that is available. The traditional economic model still mostly applies to the wealthy and what’s left of the middle class. The majority of consumers no longer have the means to participate as they did.
Neither inflation nor deflation address wealth inequality. The relationship between salaries and prices is broken. Traditional economic indicators assume that businesses doing better means the average person does better, but that is no longer the case. Most of the gains now go to wealthy investors. That leaves us with a situation where the traditional economy looks great, but large numbers of people can no longer afford housing or food. Unless you are part of the 1%, that is not really a good economy.
Average rate of inflation means some things can come down in price, but are offset by other items going up. It’s not absolute.
The only thing that would cause deflation is innovation or reduced demand, and there’s not a lot of innovation in food, and everyone but anorexics seem determined to eat.
I skipped breakfast just doing my part to help…