Re:Federal Reserve Now Projects Rate Increases in 2023 as Ec...
by imtringued on Wednesday June 16, 2021 @06:18PM
(#27534093)
>The supposed problem with deflation is that economic activity slows down and enough stuff won't be produced. But we're presently drowning in stuff!
The entire point behind deflation is getting rid of that surplus. It's about trimming everything except basic cost of living. If you are a company and your profit is going down every year you are going to cut production. Cutting production also means cutting jobs. It's that simple.
The savings utopia also doesn't exist because the 0% lower bound for interest rates prevents money creation to catch up with savings. If everyone saves there literally won't be any money left to save.
Deflation is an economic dead end. People believe that money is infallible and the perfect risk free asset, especially if it's value is going up via deflation. The risk free assumption is just an approximation given a properly functioning economy and deflation doesn't reward a properly functioning economy.
The entire point behind deflation is getting rid of that surplus. It's about trimming everything except basic cost of living. If you are a company and your profit is going down every year you are going to cut production. Cutting production also means cutting jobs. It's that simple.
The savings utopia also doesn't exist because the 0% lower bound for interest rates prevents money creation to catch up with savings. If everyone saves there literally won't be any money left to save.
Deflation is an economic dead end. People believe that money is infallible and the perfect risk free asset, especially if it's value is going up via deflation. The risk free assumption is just an approximation given a properly functioning economy and deflation doesn't reward a properly functioning economy.