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"The economy" in this instance being a playground for the rich.
People won't stop paying for food or rent just because their money might be worth a little more tomorrow. They won't skip buying minor entertainments just because maybe their meager salaries might be worth a little more next week.
Deflation is poison for the owner class, not the working class.
Indeed, people won't stop paying for everyday necessities, but the economy consists of more than just individual people: there's the state and there are businesses too. You conflate the latter with “the rich”, which is generally true for corporations, but corporations are not the only form of business; there are cooperatives, partnerships, and others which can distribute profits more fairly. In any case, deflation affects all businesses, including fair ones, and the state itself. As another commentator suggested, money is meant to change hands and should never become an asset worth holding.
Forgive my admitted ignorance. If money should never become an asset worth holding, how can inflation be better than deflation for the working class?
Proportionately, the rich hold a lot more money assets than the poor, who generally don’t hold any or very little.
If you have debt, inflation eats away at that debt. If you're paying 5% per year on that debt, but inflation goes up 3%, you're actually only paying 2% on that debt. That's good for people who have debt, and bad for the people who invested the initial money for that debt. With deflation, it's the opposite.
This assumes your wages go up with inflation, though. Over the long term, that does tend to happen, but there are certainly periods where that is not true.
Not in the US. We haven't seen a real pay increase since the early 1980s.
That became something of a meme post-2008 financial disaster, and it was true then. It's not true anymore. That's what I meant by it not being true in certain time periods. It depends on where you put the start and end dates.
As of now, median wages are significantly better off in real terms than any time in the 1980s: https://fred.stlouisfed.org/series/LES1252881600Q
1982-84 CPI Adjusted Dollar - aka, a measure that eliminates housing, healthcare, and energy costs. Like, the two main drivers for CoL in the US.
And, it's still more than kinda true now. Ever wonder why homelessness is jumping up? Or why healthcare bankruptcies are extremely common? Is it because the wage growth outpaces those costs?
I don't believe so.
Oh, that also only tracks "Full time workers".... Something like 60% of Americans are NOT full time workers. They work 39.5 hrs, just enough to put them under "full time".
Oh, also, you're wrong that this excludes housing and healthcare:
https://www.bls.gov/cpi/questions-and-answers.htm
Energy is a little more complicated, but it should be included in the graph above:
https://www.bls.gov/cpi/factsheets/common-misconceptions-about-cpi.htm
So, do you have a more comprehensive set of data? Because when people were posting about this circa 2012, the above link is what they pointed to. Now that it's not showing the same answers, people suddenly don't like it.
Edit: a more robust way to make a similar argument is to point out the disparity between wages and productivity since the 1960s. That's a huge gap, it's only gotten wider, and it'd take a long time to fix without a revolution.
A more comprehensive set of data?
I dunno. Not my job to try and prove capitalism is Good, Actually.
In other words, what do you use to back up your assertion that wages have not matched inflation?
It's deflation that turns money into an asset worth holding and thus slows down economies. Too much inflation isn't good either, for different reasons. A slight and stable inflation is the sweet spot.
Indeed, the rich do proportionately hold a lot more money than the poor, but it isn't much. The rich mostly have shares in corporations, bonds and real estate.
Inflation is generally worse for workers than for the rich because the latter have more pricing power. If both your living expenses and your income after taxes increased by 20%, you'd even end up with more money than before, assuming your living expenses were a fraction of your income. Unfortunately, prices haven't risen equally; the cost of living increase has generally outpaced real wage growth. The rich have been able to set higher prices; workers haven't been able to extract high enough wage raises.
Neither high inflation nor deflation are good for workers. What workers need is pricing power through strong unions and political support.
Only if you enjoy living on debt.
My understanding is that a slight and stable increase in the money supply is beneficial regardless of the monetary system in use, because it incentivizes economic activity. That said, I'm only somewhat familiar with our current fractional-reserve banking system and don't know enough about other systems, historical or hypothetical, to present my understanding as fact.
The problem is "incentivizing economic activity"... Economic activity, honestly, shouldn't happen unless it's somehow benefiting human life.
Sectors like banking and ad tech do nothing to benefit human life. They serve to extract resources from people, and thats all.
That just shows how broken the system is, though, doesn't it? It's geared towards benefitting the haves over the have-nots. Yes, it probably hurts the people further down the line from the shareholders and board members... but mostly because they can't countenance not having their numbers going up. So they pass along losses to the people who can tolerate the least.
I'm sure you're just approaching this from a sterilized, clinical approach "that's just the way things are"... but it's not particularly beneficial to people to consider things exclusively that way.
I think we both agree that capitalist logic is inherently extractive, exploitative and generally unhealthy. What I've been trying to point out is that we should not cherish deflationary tendencies in China or seek deflation in our own economies as a solution of sorts to the cost of living crisis, but rather pursue the power to increase our wages to at least match our ever rising productivity. In my opinion, unionizing –hard as it is– is more feasible than changing our monetary system –necessary and desirable as that would be– or overcoming capitalism.
And if those other types of business don't place "Profit maximization" as their primary focus, then a deflationary period wouldn't be bad for them, either.
Again, it's only bad for people with debt. And the more debt you have, the worse delfation is for you.
Debt, is really only "good" if you are a corporation. Because debt lets you spend a load of money that ain't yours, and getting the working class deep into debt is a good way to ensure you have a decent slave labor force.
Complete layman’s take on deflation, but wouldn’t trading basically stop with deflation?
Say I buy a product for 4$ and the next day due to deflation I can only sell it for 3$, why would I then go and try to trade said product?
It would be bad to have anything on shelf for a prolonged period. Food would probably not be affected due to its short shelf-time, but hardware stores, electronics, basically anything else would have the risk of significant losses. These stores would simply close, no?
That also extends to global trade - big cargo ships are sailing for weeks before they can distribute their goods. The whole time the products would loose value.
Probably I’m wrong, but if that’s true, deflation would really make the shit hit the fan.
That $3 is worth as much as that $4 was now because deflation made the value of the dollar go up. So the only change is that "number go up" didn't happen on a purely psychological level. If your trade provides value then you can trade for more value.
True, the sentence about the items loosing value is incorrect.
However, my argument is still valid, why would I go and buy the thing in the first place, if I just could have waited for today and still have 4$? I would have „gained“ a dollar by doing nothing instead of taking the trouble of procuring the item.
Because deflation isn't going to be at that rapid a pace. If inflation was such that an item priced at $3 today gets priced $4 tomorrow, that means a daily rate of change of ~33.33% which is an insane rate of inflation and would be a problem as well, but nobody uses that to claim inflation is absolutely bad.
Who is going to hold off on buying something if it's 2% "cheaper" after a whole year? People certainly don't put off buying phones even though phones still get way higher than 2% increase in performance every year or two.
Of course, im exaggerating for simplicity.
As I said the my first comment, I’m talking about stuff that may be shelved a longer time. And at large scales, small percentages do matter significantly.
With inflation, having something shelved only looses value if something newer and better comes out. Deflation would add deflation itself as another risk.
To put it in other words: I have to raise the price for my items in stock along with deflation to make the trade worthwhile, which in turn contradicts deflation since then the value you get for your money is the same.
The exaggeration describes hyperdeflation which is a completely different beast, so it's not illustrative of the impacts of deflation in general. Either way, you're focusing on the raw price amount without considering the value of the items being exchanged. If anything, deflation would help with selling since if a store has an item on sale for $10, a year later at 2% deflation selling for the same price it'd be worth 20 cents more in relation to the previous year's dollar value and the store wouldn't have to increase the price to make up for a loss in the value of the dollar. From the customer's perspective, they don't see a price increase even though the value of their dollar has increased.
Have you never seen somebody wait for a sale to make purchases? Or cut coupons? "The poor" frequently put off purchases to save some money.
Only nonessential purchases. The poor generally don't have a choice to not pay rent in the US, you can get evicted after being 3 days late in most US states.
Yes, that's what I'm talking about. Do you think the lower class only spends money on food, rent and gas? Some may but there are a lot of "non rich" people who buy nonessentials.
As someone in the lower class, yes. A decade ago you might have had a point, but unless they're maxing out credit cards no one below median income is spending on non essentials.
That's a completely indefensible statement and you know it.
Credit card debt is at an all time high, more people are living paycheck to paycheck than ever before, Americans rejected Biden explicitly because of his gaslighting about how good the economy was, union membership is up, and nearly all Americans celebrated the death of that CEO.
People aren't in a good spot. They don't have disposable income unless they above median wage. The great depression had better ratios in terms of money spent on essentials.
This is utter bullshit and you know it. I know several people below median income, one is sending a child to college. They have iPhones, TVs, etc. To claim that these people are only buying the absolute necessities is just lefitst BS.
Both iPhones and TVs are cheaper than a months worth of groceries.
Yes, so as I said - they're spending money on more than just essentials. Jfc 🙄
They spent money on more than the essentials. Is what you meant. People on average go seven years between tv purchases and 3 years between phone purchases.
KFC, you need to be poor at one point in your life.
It's exactly what I've said - more than once.
No, the tense is different. Reread and try again.
Maybe ask yourself why I included year between purchase statistics.
WTF are you talking about?
Not because of deflation, but because they're looking for "The deal". More akin to the dopamine inducing tricks many microtransaction games use these days.
Because there is no deflation... Unless you're living in China?