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How come we experience so much more inflation than deflation? in other words, why does our buying power decrease far more often than it increases?
(lemmy.dbzer0.com)
this post was submitted on 22 Jul 2023
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Everyone seems to be missing the most dangerous part of deflation: If prices fall year over year, collateralize credit becomes incredibly unstable. If you borrow a million dollars from the bank to build a house and then in five years that house is worth half a million...well you would be stupid not to walk away for your loan and leave the bank with a half million dollar hole in its balance sheet. If the whole market does this consistently year after year then banking becomes impossible and the whole system collapses. Weve had this happen before, such as during the Great Depression and very briefly during other market crashes like in 2008. If a central bank has to choose between inflation and deflation, they will choose inflation every time.
So you're saying that deflation hurts the banks? Oh no! Not the banks!
Fuck regular people, right? A home is obviously an investment first and shelter second. Why would anyone need a home to live in, if they can just rent it out for obscene amounts of money, because banks have to have infinite profits?
It doesnt hurt the banks, it destroys them. The modern economy is unable to function without banks. I suppose if you were in favor of entirely destroying the modern economic system, long term deflation would be the easiest way to do it. Dont expect some sort of socialist utopia to come out the other side though. Last time we had a serious deflationary run we ended up with a handful of obscenely wealthy robber barons and a world war.
Should we at least, differentiate deflation due to technologies, deflation due to stagnant economy and "price slashing" and those desperation crimes?
We should acknowledge deflation due to technology, right?
Couple it with no "passive income" pumping money for the "rich reservoirs", overall prices gets cheaper in line with everyone's active earning? (All it takes is remove the "passive income economy" that generates nothing but "financing". Tax/donations does the same, without interest being created?
Yes, companies can save money because one person with a computer can replace a whole pool of secretaries or a room full of people doing mathematical calculation. You can buy a whole wardrobe of full of clothes for what a few outfits might have cost before, thanks to automation and cheap foreign labor. Weve seen quite a bit of that in the last 50 years. It means you can buy all the mass produced plastic crap you want, but you cant afford a house to put it in. And it has resulted in a MASSIVE boost in wealth equality, its just that it was a global phenomenon and it was the poor people in places like India and China that experienced it.