A small amount of inflation is healthy. You REALLY want to avoid deflation, because that means the value of your money is increasing. If people know their money will be worth more in the future, they won’t spend it, incentivized to save and sit on it. That means on average everyone spends less, slowing the economy down and starting into a recession/depression.
Gonna slap this with the good old “I am not an economist” disclaimer, juat what I remember from economics class in high school
The idea is that deflation affects the investor class. Assuming a “healthy” 3% inflation rate, the value of your savings decreases by 3% per year. That means you lose money if you can’t invest in something earning more than 3%. Traditionally interest rates have been around 0%, which means bonds and savings accounts also pay 0%. So, your only options to not lose the value of your savings is to invest in the stock market, risky businesses, or real estate.
As a middle class person that means that it mostly affects my 401k, but for millionaires and billionaires, deflation means that they would sit on their hoard instead of investing it. Traditionally that means no funding for new businesses, inventions and ideas, and that’s also why the investor class pays much lower taxes than the working classes.
But nowadays “investment” seems to mostly be buying good companies and enshitifying them or bribing politicians, so maybe it would be better if we encouraged the rich to sit on their money instead of using it to make society worse.
Only problem that right now people also may decide against buying because they can’t afford it. Also, I’m not sure world is producing goods at a healthy rate either, more like we’ve got a bit of an overproduction
A small amount of inflation is healthy. You REALLY want to avoid deflation, because that means the value of your money is increasing. If people know their money will be worth more in the future, they won’t spend it, incentivized to save and sit on it. That means on average everyone spends less, slowing the economy down and starting into a recession/depression.
Gonna slap this with the good old “I am not an economist” disclaimer, juat what I remember from economics class in high school
What you learned in high school puts you miles ahead of 99% of these comments
People still have to spend money, hoarding wealth makes no sense if you can’t eat and pay for services and utilities.
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I have no idea what this is in reference to
The idea is that deflation affects the investor class. Assuming a “healthy” 3% inflation rate, the value of your savings decreases by 3% per year. That means you lose money if you can’t invest in something earning more than 3%. Traditionally interest rates have been around 0%, which means bonds and savings accounts also pay 0%. So, your only options to not lose the value of your savings is to invest in the stock market, risky businesses, or real estate.
As a middle class person that means that it mostly affects my 401k, but for millionaires and billionaires, deflation means that they would sit on their hoard instead of investing it. Traditionally that means no funding for new businesses, inventions and ideas, and that’s also why the investor class pays much lower taxes than the working classes.
But nowadays “investment” seems to mostly be buying good companies and enshitifying them or bribing politicians, so maybe it would be better if we encouraged the rich to sit on their money instead of using it to make society worse.
Only problem that right now people also may decide against buying because they can’t afford it. Also, I’m not sure world is producing goods at a healthy rate either, more like we’ve got a bit of an overproduction
Yeah, obviously wages SHOULD be keeping up with inflation and inflation should be a low, stable amount. That’s the problem, not inflation in general.