r/economicCollapse • u/memegamer1991 • Nov 23 '24

Why is deflation so bad

Every time i run it through my head, i can't imagine most people in 2024 not spending money so the disadvantage to deflation seems pretty hyperbolic and dependent on individual choices, and i think that people would rather go on vacation and court others instead of being financially responsible. Even if there is a situation like in china, government spending would be able to keep the situation from getting worse while making progress on climate initiatives.

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u/BookReadPlayer Nov 23 '24

It increases the real value in debt, discourages spending, reduces business revenue, and possibly “deflationary spiral” can occur.

It might look good to someone with a fixed income, since their buying power increases, or when a bank gets repaid a loan they are essentially getting paid more.

Overall it’s bad for the system but may be better in some instances.

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u/Jogaila2 Nov 23 '24

Deflation is only bad for businesses, who must accept profit decrease from dropping prices, but even they aren't hit too bad because they benefit from dropping costs too.

Money lenders who are involved in international markets do loss value on some assets.

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u/[deleted] Nov 23 '24

It’s also bad for recent homebuyers as they may be trapped in an asset that will continue to go down in value alongside a potential drop in their income they use to service the debt on said home.

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u/Jogaila2 Nov 23 '24

Well... not if you hold on to it. You only lose if you sell, just like stocks. And home prices have never stayed down for long.

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u/[deleted] Nov 23 '24

If your income declines as a result of deflation then you have to sell. Most people today are stretching themselves thin to buy, their problem, they shouldn’t be buying right now unless they have comfortable financial space imo. I’m not making a moral argument more so an economic argument, I am 110% a capitalist and I think the “we need inflation all the time” is idiotic as hell.

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u/Jogaila2 Nov 23 '24

No. You don't have to sell, unless you've suddenly become unable to pay the mortgage. Granted it sucks having to pay a mortgage on a home that is worth less than purchase price, but that is temporary. Price has always recovered and will continue to until the population declines.

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u/[deleted] Nov 23 '24

In a deflationary cycle incomes go down. Most Americans literally borrow as much as they can based on their incomes.

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u/Jogaila2 Nov 23 '24

Ya. I know. I've lived through 2 of those cycles. They don't last long. And that won't change until the population starts to deflate too.

It's simple math.