Damus
Code & Psychology ⚡️ profile picture
Code & Psychology ⚡️
@CodePsychology
Usual argument why inflation is necessary:
In case of deflation, if the price of everything goes down, people won't spend their money, because they will rather wait, and that is bad for the economy.

Good response (idea came from @Guy Swann ):
Inflation is a result, not a cause.

The price of the things can be defined as:
Price = "Amount of money" / "Amount of goods"

So inflation occurs as a result if either the amount of goods decrease (gdp) or the amount of money increase (money supply).

If we fix the money supply (amount of money), deflation can only occur if the amount of goods increase, so when the economy grows. So deflation means the economy is growing.

Now what is the problem with deflation then?
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Viktor Vsk · 122w
The problem bothering me with deflation is if humanity is ready for it? If prices go down and ppl hoard then only the most necessary goods and services will be bought and sold: food, utilities… maybe even hair cut will be mostly handled by yourself I see such a world as rather good - instead of n...