Problem with deflation is: what do people do when theres deflation when it comes to optional expenses? Well, they may postepone them in hopes that prices go further down, this means that there’s less demand, prices go downer, businesses may start to fail, putting people in unemployment, reducing demand, and death spiral. Basically same thing as inflation death spiral but with deflation. Consumer confidence is a very delicate thing
this means that there’s less demand, prices go downer, businesses may start to fail, putting people in unemployment, reducing demand,
I’ve always been skeptical of this and I’m not really aware of historical examples that prove it. The part I just quoted - “less demand, prices go downer, businesses may start to fail” - that means supply decreases too. All that’s really happening if you have a couple % deflation is that people are slightly more incentivized to hold onto their money, and the fact is that currencies don’t just naturally appreciate in value that much, at most in the long term I think you have “the same amount of money in circulation” vs. population growth causing it to chase a slightly larger economy.
If you want a historic example look at the politics In Germany that got Hitler into power. Wikipedia is sadly only in German, but you can see from the graph that there was 10% deflation in 1932, with bad consequences.
I’m sure this does get lumped into “causes of Hitler’s rise to power/WWII” list somewhere. I seem to recall the inflation immediately prior being a lot more famous - that Germany was mandated by treaty to pay reparations after WWII, and that the Weimar Republic printed so much money people were using it as wallpaper or burning it as firewood (supposedly at least). In general, that there was a widespread sense Germany had been wounded somehow, which he was able to capitalize on, telling people to “fight back” against the minority groups he characterized as the forces of oppression. That’d be everywhere between 1918 and 1933 or so. Not so much “the purchasing value of money marginally increased for a one year period prior to Hitler’s rise”.
It’s a myth that the hyperinflation was the reason for hitlers rise. The hyperinflation occurred in 1923. Hitler tried a coup in November 1923, failed miserably, was thrown into prison and the party was banned for a while. In 1928 they had 2,6% in the election.
Only during Brünings deflation politics the nsdap gained momentum. The vote 1930 gave them 18,3% and in 1932 37,3%. Now compare that to the deflation graph of the other Wikipedia link I gave last comment.
Problem with deflation is: what do people do when theres deflation when it comes to optional expenses? Well, they may postepone them in hopes that prices go further down, this means that there’s less demand, prices go downer, businesses may start to fail, putting people in unemployment, reducing demand, and death spiral. Basically same thing as inflation death spiral but with deflation. Consumer confidence is a very delicate thing
I’ve always been skeptical of this and I’m not really aware of historical examples that prove it. The part I just quoted - “less demand, prices go downer, businesses may start to fail” - that means supply decreases too. All that’s really happening if you have a couple % deflation is that people are slightly more incentivized to hold onto their money, and the fact is that currencies don’t just naturally appreciate in value that much, at most in the long term I think you have “the same amount of money in circulation” vs. population growth causing it to chase a slightly larger economy.
It probably only is problematic in the same amount that inflation is bad. If it’s a little, it’s fine. If it’s a lot, you’re screwed
TBH this strikes me as the kind of thought that doesn’t come from careful consideration of how it would actually play out.
If you want a historic example look at the politics In Germany that got Hitler into power. Wikipedia is sadly only in German, but you can see from the graph that there was 10% deflation in 1932, with bad consequences.
https://de.m.wikipedia.org/wiki/Deflationspolitik
I’m sure this does get lumped into “causes of Hitler’s rise to power/WWII” list somewhere. I seem to recall the inflation immediately prior being a lot more famous - that Germany was mandated by treaty to pay reparations after WWII, and that the Weimar Republic printed so much money people were using it as wallpaper or burning it as firewood (supposedly at least). In general, that there was a widespread sense Germany had been wounded somehow, which he was able to capitalize on, telling people to “fight back” against the minority groups he characterized as the forces of oppression. That’d be everywhere between 1918 and 1933 or so. Not so much “the purchasing value of money marginally increased for a one year period prior to Hitler’s rise”.
It’s a myth that the hyperinflation was the reason for hitlers rise. The hyperinflation occurred in 1923. Hitler tried a coup in November 1923, failed miserably, was thrown into prison and the party was banned for a while. In 1928 they had 2,6% in the election.
https://de.wikipedia.org/wiki/Reichstagswahl_1928?wprov=sfla1
Only during Brünings deflation politics the nsdap gained momentum. The vote 1930 gave them 18,3% and in 1932 37,3%. Now compare that to the deflation graph of the other Wikipedia link I gave last comment.