Contrary to popular belief millennials are not the consumer generation they are made out to be. The average millennial makes less and works more than the previous generation. The avocado toast meme was made to sell news articles and does not have a hint of truth to it. The millennials, on average, are the poorest of any generation in the last 50 years adjusted for age primarily due to student loans, poor job prospects (TWO financial disasters in just over the "critical decade" of age 25-35), and wage stagnation. Anti-consumerism is a major theme in many millennial circles. If you want a consumer class look at the boomers and Gen-Z. They don't produce less because money is virtually free. There's no value tied to the money the business used to buy factories to produce widgets. It costs nothing to produce something thanks to the globalization of labor. Why not throw 200,000 widgets on the sales floor. Eventually they'll sell. It's not like it was your money you spent anyway!
This is gonna be a long answer - it's not a simple question. One of the big reasons is because of financialization. It's a big word, but essentially it means that household budget items and the medium and long term goals of a typical American family are being financed. This has been a happening over many years. So instead of saving up excess earnings and buying a car or house with cash, consumers are building credit scores and then putting a fraction of the purchase price down and carrying the costs forward. This is now the norm in nearly all consumer markets. There are many reasons for this. One is that fiscal and monetary policy in the United States (and in developed economies, generally) is designed to incentivize credit based consumption. Interest payments are deducted against taxable income, and capital gains have exemptions and differing treatment to wage based income under tax law. The tax code rewards those who save less and spend more. With tax credits, deductions, and exemptions, it also rewards people who file jointly and have children and own a home and have debts. Not just households, but businesses as well through depreciation and many different kinds of deductions. Low interest rates, and a 30 year bull market in bonds, means financing gets cheaper over time, so assets are repriced higher over the long term to reflect the consumers increased ability to pay. (But only in asset markets that are financed and have tax incentives!) This has been happening for many years in the United States. We have reached a point where the entire household budget is being financed. Before > and Now Car ownership > purchase of automobile financing Pay medical bill > purchase of medical expense financing (insurance) Home ownership > purchase of real estate financing Buying stuff > use of consumer credit (credit cards) You can see that financialization is a trick to drive consumption and support asset prices. But, perversely, it encourages people to live beyond their immediate means and so it increases systemic risk! It has also allowed corporations to keep wages artificially low, and encouraged price gouging and rent seeking (means higher prices and same or worse service) as well as encouraging monopoly business practices and ruthless competition among corporations. The largest corporations can create accounting structures that reduce or even mitigate entirely taxation itself. There are legitimate policy and economic governance reasons to have policies like this in place, but America is unique in that we were at one time one of the richest countries and had sound money policies. The economy was not like this a long time ago. All it takes is a slow down in credit expansion to cool inflation. Then, if the economy slows down due to the business cycle or demand shock, then credit can actually contract and the inflation reverses. The interest payments, instead of helping consumption by putting off expenses and allowing households to have more disposable income, actually start reducing spending. If the economy slows down, then credit expansion can reverse, debts still have to be paid, and there are less people able to spend. Less people to finance asset purchases... For the average American household, the financed asset's pricing starts to seem out of touch with real economic conditions, the debts seem heavier and so people spend less. The same thing can happen to businesses. This causes deflation (disinflation), and can lead to recessions. If it gains a footing it can cause a depression and debt deflation.
Few thoughts regarding causes of the deflationary impulse: 1) US companies have been buying back $800 BILLION dollars per year in stocks per year, which, mechanically, is very similar to a bank destroying old currency....for example, if a company sells goods and services into the economy, and then takes the cash proceeds from those sales and uses it to retire stocks, the money completely disappears from the economy, and is deflationary. 2) The average American today has very large debts compared to the average American in the 1970s...if you have a large mortgage, student loan debt, large monthly healthcare premiums, and a large credit balance, you are mechanically the equivalent to a person who is "saving" much of their income every month instead of recirculating it into the economy....if 80% of my paycheck disappears as soon as I get it in order to service debts, over time, I will be spending very little in the real economy. 3) Corporate financialization over tangible PPE investment towards increasing capacity. 4) Income inequality - the wealthiest 1% of Americans own a greater share of the national wealth today than at any point in the history of the USA....when these people receive additional money, it goes towards buying houses, stocks, fine art, collectible cars, bank accounts, philanthropy, etc....coincidentally, if you look at the items listed above, all of those "rich people industries" have seen massive inflation over the last 20 years.....the poorest segment of society has the greatest propensity to spend additional income in the real economy. The wealthiest segment of society has the least propensity to spend additional income in the real economy. We have chosen, as a society, to do more and more for the wealthy and less and less for the poor over the last 4 decades. 5) Technology - has enabled companies to "do more with less"....just-in-time manufacturing, lean six-sigma manufacturing (a process adopted from deflationary Japan) have all lead to an optimization and efficiency, which leads to decreased demand for CAPEX thus lowering demand accross the board. 6) Chinese labor being used to replace US payrolls thanks to offshoring of production....big depressor of wages.
There is no question of deflation or inflation in a country with fiat money. It will be always infaltionary, because that is the only option that they can regulate. For example, if a deflationary environment starts to be a problem, they can and will inflate their currency untill there is inflation...
In a nation with fractional reserve banking that runs on credit (a VERY good thing!) deflation is never a good thing. It's harmful in such economies because it means real interest rates will rise and that has the potential to tip an economy into recession, which unless it is handled correctly via central bank and fiscal policy can feed upon itself via positive feedback and the recession can become a depression. Normally, the creditor debtor relationship is such that in aggregate, after inflation is taken into account, debtors return to creditors, via interest, not substantially more buying power than they borrowed. If however deflation becomes significant the rise in real rates can be such that creditors will owe substantially more buying power to creditors than they borrowed. Such an occurrence would be disastrous for any economy that runs of credit. [Real interest rate = nominal rate - inflation rate; in deflation, the inflation rate is negative]