this post was submitted on 21 Sep 2023
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Financial planner here. Deflation is bad for “everybody” that wants to talk to you about it. It’s bad for financial planners because it makes the stock market go down, so we make less money. It’s bad for politicians because everybody that votes seems to think the economy consists of however high the Dow Jones gets. It’s bad for companies because it’ll cut into their profits. The more these entities can convince you that deflation is bad, the more likely people are to campaign against it.
The real truth of it is that deflation is good for PEOPLE. People are not the economy. The concern I have is that during a deflationary period companies tend to do more layoffs and cut corners on quality control. As long as income & unemployment stay the same then deflation would be a very welcome reprieve from these last couple of years.
This is why the union strikes are so important right now. If people see that the current union strikes work, then they’re far more likely to unionize when companies start to do layoffs. Really the only way for companies to protect themselves from deflation is to screw over the workers, and unions stand in direct opposition to that move.
Deflation encourages businesses and people to hold on to their money instead of spending it. One person's spending is another person's income, so when spending goes down so do incomes. When people's incomes go down, they reduce their own spending in response. This is a vicious cycle that leads to a lower standard of living.
Don't believe me? It is what happened to Japan since the 1990s after their real state bubble exploded. It is called "the lost decades" and it was very much felt by the population.
Well given we have limited resources and climate change is causing a lot of issues, we really should stop growing the economy and creating more inflation, because we're going to see widespread deflation over the next few decades. Everything we build up now will come back down, as we refuse to build for the new world & cling to the old one.