I strongly recommend you review the definition of deflation.
> Higher inflation means our debt is 'worth' less
Inflation is a huge benefit to the debtor class, which includes most homeowners. The rhetorical tactic of focusing on high gas prices brilliantly misdirects people from asking the relevant question of why their wages aren't increasing at the same rate as inflation. Once wages catch up to this recent bout of inflation (they eventually will), most consumers will be much better off than if the inflation had never happened.
It is possible I am working with old mental models, but first search result defines it as:
"Deflation is a fall in the overall level of prices in an economy and an increase in the purchasing power of the currency. It can be driven by an increase in productivity and the abundance of goods and services, by a decrease in total or aggregate demand, or by a decrease in the supply of money and credit."
If prices increase ( albeit at a lower rate ), it is still inflation ( especially if purchasing power stays where it is, which it typically would ).
Can you elaborate on your thought process? It is possible I am misreading something.
<< Once wages catch up to this recent bout of inflation (they eventually will), most consumers will be much better off than if the inflation had never happened.
Um.. I think I have to categorize that statement as wishful thinking. Federal minimum wage remains very low and even recent attempts to update it were shot down. I think 'eventually' is doing a lot of heavy lifting here ( it likely is true, but the time horizon on that statement is fairly long ).
I am open to discussion, but I am not convinced at this time.
[1]https://www.investopedia.com/articles/personal-finance/03091...
The first part of that sentence says that prices decrease. They do not increase at a lower rate, they actually fall in deflation. Deflation is negative inflation, if you want to think of it that way. Deflation is _not_ small positive inflation.
Since we are on a tech-focused site, the best example is that tech goods are typically deflationary. 1 TB of SSD costs less than it did 3 years ago. Imagine this happening to everything in the economy and you understand deflation.
The second part is maybe confusing you:
> increase in the purchasing power of the currency.
This says that if I have $100 and a good costs $10 today, I can buy 10 of them. If prices decrease (because this is deflation, prices go down) and now the good is $5, I can buy 20 of them with the same $100. The purchasing power of my $100 has increased.
> I think I have to categorize that statement as wishful thinking.
Average US wage in 1970 was about $6,200 (per year!). Then inflation spiked, prices rose on everything. Eventually that filtered back into the labor market because nobody will work if the wage won't buy food at the newly inflated prices. This will happen again, but it will take longer due to labor generally having less power in today's economy vs that of 1970. This will happen whether or not the minimum wage increases, but more of necessity -- laborers will not come to jobs that don't pay their bills.
The original if clause may be true( "If the expectation is that everything will be cheaper next month than this month, that creates an incentive for everyone (and every business) to delay purchases as long as possible (because they will save money buying in the future"), but it is not applicable to the current environment as we are not experiencing deflation, but inflation. As in, business are not expecting lower cheaper ( lower prices ). They will be expecting less high prices. If they will curtail spending it is because got prohibitively expensive. If anything, they will save money buy stocking up, while the price is low. I personally think your interpretation model for what is happening is off here.
Hope that makes more sense now.
Let me see if I can sum up the main argument until now:
You post >> If the expectation is that everything will be cheaper next month than this month, that creates an incentive for everyone (and every business) to delay purchases as long as possible (because they will save money buying in the future).
I post >> [ but ] Nothing will be cheaper ( decrease in price ) [ next month ]
You post >> I strongly recommend you review the definition of deflation.
I post >> "Deflation is a fall in the overall level of prices in an economy and an increase in the purchasing power of the currency. It can be driven by an increase in productivity and the abundance of goods and services, by a decrease in total or aggregate demand, or by a decrease in the supply of money and credit."
You post >> "Deflation is negative inflation, if you want to think of it that way. Deflation is _not_ small positive inflation."
I post >> this post since we seem to saying the same thing so I revisit initial assumptions
You may want to join the top-level thread, which is about the current inflationary environment.
This may be the misconception that is driving this. Nothing will be cheaper ( decrease in price ). It will simply not appreciate in price as much ( price will increase less ).
<< When everyone slows spending at once, it can lead to severe a recession or depression.
Agreed, especially in US where consumer spending drives the economy.
Still, in US, for better or worse, a lot of personal wealth is stored in real estate ( which also manages to explain some US idiosyncrasies ). Deflation would 'destroy' equity for owners of that real estate so a lot is regularly being done to keep the housing prices high and even more to keep them from going lower.
It is not bad in itself. Frankly, I personally see deflation as a way of economy correction, but that is one person that has limited exposure to some of those pressures. But deflation is not what is happening here. Deflation would be a negative inflation rate ( and that is not the case ).
Now..there are few other angles to consider. Higher inflation means our debt is 'worth' less; deflation means it is worth 'more'. If you owe a million dollars in an environment, where an average house costs a million dollars, it is likely that it becomes the norm ( and it is technically good for the borrower ). Interestingly, some would argue US was actually trying to inflate their way out of its staggering debt.
There are also import/export considerations for companies that operate in that space ( as you also noted ), but I am hardly an expert ( or even that interested in that subject ).