[Calamitous]

> Nobody wants deflation.

I hear this argument regularly, but I’ve never understood why. Hyperinflation is historically a bad thing, but whenever I ask about deflation, I just get hand-waving about the Great Depression. Is there any reading that lays out the dangers of deflation?

[lmm]

Deflation has a natural tendency to spiral; things will be cheaper in the future, so people put off spending, which brings prices down further and so on. You create an incentive to hoard cash rather than consuming or investing, and that is also self-reinforcing, so money stops functioning as money with all the trouble that implies.

[nradov]

This is obviously not how things generally work in the real world. Prices for personal computers have been deflating for years. The computing power in a $1000 laptop today would have probably cost at least $3000 a decade ago. And yet customers keep buying them instead of putting off spending because they want to have stuff today.

[nikanj]

Deflation throws on the breaks in the economy, because X is cheaper if you postpone it. With X representing essentially all economic activities like buying a new phone / hiring a programmer / going on vacation / etc

This would be great for the environment, but absolutely terrible for the economy

[thaumasiotes]

> Deflation throws on the breaks in the economy, because X is cheaper if you postpone it. With X representing essentially all economic activities

Sometimes I think about this as promoting investment in cash. Deflation over time means cash yields a profit.

But since cash doesn't actually do anything, investing in cash instead of something else is harmful.

One implication of both of our comments is that unanticipated deflation is good. What causes problems is the reaction people take to anticipating that deflation will occur -- they wait it out -- not the fact that things are cheaper.

The necessary refinement would be that unanticipated deflation that comes from an increase in the amount of stuff is good, and unanticipated deflation that comes from a reduction in the amount of money is [?].

Introducing that dimension asks us to fill out the grid:

- anticipated deflation from an increase in the amount of stuff: [?]

- anticipated deflation from a reduction in the amount of money: bad

[ajmurmann]

To add to this, it's also very hard to get out of as we've seen for decades in Japan. Some countries get stuck in recurring waves of inflation as well, as we set with Argentina, but that's arguably more sure to avoidable policy choices.

[mjan22640]

The benefit of having X now rather than later can still be more valuable than the price drop.

[juped]

No, because it's a boogeyman.

The world should get richer, and things should get cheaper. Creating wealth is good.

[jeezfrk]

Making those with money able to buy more tomorrow than today will make all sales plummet... all real needs go unmet and all efficient loaning of money cease.

Holding your breath will leave more oxygen for whoever survives .... but there won't be as many who need it left alive.

Deflation is deadly unless you worship coins as the only valid measure of economics.

[ajmurmann]

It's not only things that you will get for a lower amount of currency, but also labor.