I'm gonna bite on this one. Why do we absolutely not want deflation? Because, the way I see it, its not about inflation/deflation as much as it is the rate of price increase or decline relative to the same in wages. Or perhaps you think that house prices in this country are affordable and justified being where they are (as an example)? Unless, of course, you're referring to the ridiculous - and worsening - burden of debt. Debtors loathe deflation.
No. Deflation hits inventory holders and a cost cutting cascades into the job market and then the unvirtuous cycle takes hold.
Uh, that's your answer? Deflation is bad because it hurts inventory holders and that this translates to job losses? I will admit, I had thought you were going to provide a weak answer here, but I totally underestimated just how weak.
Well we must never be beyond surprise. People tend to get themselves into a lot of trouble overthinking these matters and end up dug in on dumb stuff like government spending is causing inflation when the obvious is right there I front of their face. Same situation here. While there will be downstream effects of deflation, it all starts with inventory holders and job losses. From there we can speculate on debtors and central bank actions but that’s putting the cart before the horse.
Ok, you got me to smile with the first statement, my friend. Well played. Deflation shouldn't be about inventories. The only cause for concerns in deflation would be if wages fell faster than prices, and how the overall debt load would have to be paid back in more expensive dollars (via output). That's it. But since prices tend to be less sticky than wages, lower prices via deflation would be a good thing. Its only when deflation is long lasting that problems occur. See Japan's lost decades.
Japan is an interesting case and we can get into that if you want. There are a lot of misconceptions and wrong lessons people get from Japan. Now to button up this deflation thing. It’s indicative of many things now of days, we all try to show off our sophisticated understanding of something to the point that we’ve forgotten to account for the core issues. Deflation can absolutely cripple an economy. I might going back 20 years or so at this point but remember it being taught it is a “monster.” Here's a pretty elementary video on deflation. You will see “first things first” deflation-> inventories -> job losses -> wrecked economy. Now this is not saying we cannot withstand some deflation but not too much. Deflation is almost never a good thing. Anybody advocating deflation should stay away from macroeconomic policy.
While we are talking about “Bidenomics”… the US economy remains King Kong and dollar is Godzilla in the face of so many naysayers talking that gold standard and Petrodollar nonsense. https://www.theatlantic.com/ideas/a..._campaign=the-atlantic&utm_content=edit-promo