Re:German banks are hoarding so many euros they need more va...
by toss1 on Tuesday February 04, 2020 @05:24PM
(#22241720)
Of course transient deflation can be a good thing. Adn deflation as we are now accustomed in the tech industry is a very good thing - it is caused by an increase in the quality/supply of available goods, rather than a decrease in the money supply.
However a deflationary spiral of declining money supply (usually created by destruction of value), where labor utilization & wages decline makes things much harder for ordinary people.
That said, I'd like to note the the above answer was to a question about what is bad about deflation. The good thing about deflation may be that it tends to be followed by increasing growth, possibly in no small part because central banks try to do something about it.
Inflation prevents low income earners from saving, but they aren't in a position to take risk and invest. Therefore, it causes their networth to drop in relation to the wealthy (who can take risks to keep up by investing).
Inflation also keep wages down, as it's easier to pay the same wage , and any increase must be above inflation rate to remain at the same purchasing power.
Inflation also leads to speculation, rather than to invest in productivity increases.
With deflation, you end up not spending as much on discretionary/luxury goods, and only spend the minimum necessary. The prevailing theory is that this leads to slowdown in the economy - but I say it leads to low to zero mal-investments. If you have a high chance that your capital is going to have more purchasing power later, you would only invest in good, known ventures that is not speculative (e.g., building basic infrastructure that has a sound business model, rather than building fad apps).