- cross-posted to:
- worldnews@lemmy.ml
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“But deflation can hurt economic growth, as consumers will delay purchasing products if they think they will be cheaper in future.”
Not if people are already mostly only buying what they need to survive.
Which is not the case for most people and certainly not the case for businesses and banks.
You’re being downvoted but the amount of people I see in my work and personal life that barely make ends meet but are buying garbage on Amazon constantly is staggering. Prime days especially I was shaking my head at people bragging about the deals they got.
I don’t even think you need to go to that. The vast majority of spending is discretionary. Is Jeff Bezos new yacht an essential? Deflation is particular bad for workers because it means less investment and lower salaries for those with a mortgage that’s even worse. The people that benefit are those with huge stockpiles of cash.
This only really applies if it isn’t just temporary though. It’s also pretty for central banks to fix.
- eskimofry ( @eskimofry@lemmy.ml ) 2•1 year ago
So this economy was design to feed dragons, and then depend on those dragons spending money for the majority of people to even survive.
They don’t need to spend money but you want them to have to invest money and not just profit by keeping their money in cash.
Huge stockpiles of cash seems a rather useful thing in all situations, to be fair.
Individually sure but as a society we want investment into productivity stuff rather than just increasing bank accounts.
If the deflation is just a market correction after exaggerated inflation (retailers raising their prices more than general inflation to increase their short term subs) then it’s no big deal. Prolonged deflation can be bad, as that causes too much saving and not enough spending, which can really hurt the economy and people because of how it takes money out of circulation.
In an economy, the more money can circulate, the more good it can do. I use my salary to pay for for and things, that money then pays the employees of the businesses I went to, and those employees also spent that money, and so on. At each step, both participants normally get a net benefit: I can eat, and the employee can also spend the money they get from me to eat, etc. As long as the money circulates, it keeps doing good. When it stops circulating, due to being put into savings, investments or real estate, it stops doing good (or it does less good). The cycle slows down or stops.
That’s why a small amount of inflation (maybe 1-2% ? Not sure what’s optimal) is actually healthy, because it puts pressure on people with money to spend it before it loses its value, instead of hoarding it.
This is the opinion of most macro economists today, but it’s not universally accepted. Macro-economics is not nearly as scientific as micro-economics, and some people will say that its models are just about who can tell the most convincing story (or the story that’s the most convenient for those in power)
There are some people who point out that things like electronics have been undergoing rapid deflation for decades and this has not caused people to stop purchasing them. The economy is a chaotic system and anyone who claims to be able to predict it’s outcomes is selling something
Electronics also have become vastly better for decades as the tech developed. The PCs I bought over those decades are magnitudes apart in performance, but washing machines? Sure they’ve become more efficient but in the grand scheme of things that’s peanuts, amortises over a decade maybe, at best. Stove? Sure induction is nice but it’s not like others don’t boil water basically as quickly. Why should I buy a new one now when I will get an identical product next month at lower price. And then the next… that is, as long as my machine doesn’t break down, during deflation, I just won’t buy.
Democracy is always superior to authoritarianism, long term. Regulated capitalism is always superior to state owned and directed business.
Marx disagrees with you.
- argv_minus_one ( @argv_minus_one@beehaw.org ) 1•1 year ago
The Soviet Union does not. State capitalism is not good for the people.
This is the best summary I could come up with:
The Chinese economy is expected to have slipped into deflation amid signs of a faltering post-pandemic recovery, according to market forecasters.
This means retailers who stocked up on goods expecting a surge in demand after pandemic restrictions were lifted are now under pressure to cut prices.
Homin Lee, senior macro strategist at Lombard Odier, predicted July’s CPI inflation report could show “outright deflation”, with prices slightly lower than a year ago.
In the UK, consumer prices were 7.9% higher than a year ago in June, as households suffered a long run of falling real incomes.
Trade data released on Tuesday showed that China’s imports and exports both fell more sharply than expected in July, adding to concerns over the world’s second-largest economy.
Jim Reid, strategist at Deutsche Bank, said the trade data highlighted that the Chinese economy is being “dragged lower by weakness in global demand and a domestic slowdown”.
I’m a bot and I’m open source!
What’s up with this weird jump in cpi? And what did China do Differently to us to not have high inflation?
They didn’t pump hundreds of billions of dollars into the free market?
Do you think china’s market is free? If so, the stated owned companies are the ones carrying the debt. Not sure how different that is to a state having the debt.
https://www.cnbc.com/2021/06/29/china-economy-charts-show-how-much-debt-has-grown.html
And what about my other question. Where does this jump come from?
Turns out, it’s advantageous to loan out money when global interest rates were dropping to about 0. Who woulda thunk?
What are you talking about? China was never at 0% interest. What does that has to do with the previous comment?
The principle being, lower interest rates lead to more debt because spending is less expensive.
Look at the 5 year view to see the jump