Topic: The fear of deflation - page 2. (Read 1384 times)

Word.

It's why the best solution for our Western countries right now would be something like 3 years of 100% inflation.
Of course that would be harsh, but after that we wouldn't have any debt left

Short answer: Deflation is the enemy of debt. It appreciates debt. Inflation, however, devalues debt. And because the world (especially countries) is full of debt, deflation is called bad.

Actually I strongly believe deflation is good for economy alone (can't see why Europeans fear of this happening). To make it a lot easier, think of deflation as quality and inflation as quantity. Quality is always better than quantity (everybody knows this) therefor inflation only brings down economy and makes it worthless while on the other hand, deflation does the opposite and adds value to the economy and helps it grow furthermore.

It makes a lot of sense thanks. It's interesting indeed.

But from my point of view, the bolded statement represents a nonsense to me.
Isn't it good to see people not spending too much?
Of course it's harder for companies! But it also means we consume less and waste less! that we consume only what we need!

If an economy needs people to consume over and over without stopping, if they need them to consume more and more... Well this economy is doomed from the very beginning!

The thing is that both inflation and deflation are GOOD but also necessary for an economy to grow.

Just as we all say, too much of anything is not good. The same applies here.

Think of it this way. Inflation increases purchases which is good for the overall economy. It basically makes us feel that we'd better spend NOW because in a week all our money is going to be worth a lot less. This will give government more revenue and ultimately grow the economy (support local businesses and everyone you'd expect with massive buying). However, inflation decreases consumer purchasing power. If you have $500 and the inflation rate of that currency sky rockets, it'll say $500 but will soon be worth a lot less thus decreasing your capabilities of buying anything.

Now, as you said, deflation is good too! When consumers have NO purchasing power and all their money is worth nothing, deflation will correct that. It'll give power right back to consumers and make us feel more comfortable. But, and this applies when trading commodities too, such as Bitcoin, why sell NOW (so buy something, say a house or a tv) when in a week it'll be worth a lot more? And that is what goes through someone's head when deflation occurs thus limiting purchases which decreases government revenue, decreasing spending and funding and ultimately killing businesses.

So each are good and bad in their own way. A solution? A little bit of both. Increase consumer spending while soon increase consumer purchasing power. Both of these things are vital. If inflation kept happening, with no deflation, our economy would go in the dump. Same applies for deflation.

Obviously no 100% cure for both, you're going to be stuck with them no matter what you use, but if you want to avoid government controlled inflation just use Bitcoin. The price is rising and you're a lot safer than in the realm of printing thousands of dollars everyday (which would always limit deflation, allowing infinite inflation KILLING the economy).

Hope this makes sense  

Hello everyone.

I'm not an economist. But I'd like to discuss on something difficult to understand in my opinion. It's the fear of deflation.

Why is deflation so bad for economy? I understand that deflation means less money to spend that's true, but deflation also means more value for each $ you spend so that shouldn't change anything!

Deflation also means more buy power for consumers so it's a good thing for the population.

And though everyone (especially in Europe) is shaking in fear of deflation... Why?