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this post was submitted on 24 Dec 2023
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Genuine question: does that mean deflation is never a good thing? Like, right now prices are skyrocketing (tbf, not just due to inflation, but it's not like they'll ever go down again). It would take ages for wages to catch up properly, if it ever will (since it could be argued that we were still catching up from before), so wouldn't deflation be helpful here?
The economies work in cicles, it's not that it's bad or good. Long periods of the same, inflation, desinflation or to a leasser extent desinflation. Are what cause all these issues.
So if you work in the European central bank your goal would be to stabilise these changes to small periods of time, but you don't always have control, because if the US wanted (for example), they could release enough euros that would throw our currency stability out the window.
(Of course this isn't in their interest(not even China would want this I hope) because the world economy it's too interconnected.)
So when you think your politicians have control over your economy, think again. They have a limited amount of control, along with policy it should be enough to run a country.
(Sorry I keeped going in the topic of the original comment after I answered you XD)
Deflation benefits those who have the most capital already. It turns capital itself into a productive asset, but it does not actually produce anything of real value so does not help society. It is manufactured scarcity, like bitcoin and etfs.
Sure, but it would also benefit working class people because stuff's less expensive right? Inflation like we have now, also only seems to benefit people with capital while giving working class people less to spend and taking forever before the wages have equalized again (if they ever will). Wouldn't at least some temporary deflation help equalize everything again?
Unfortunately deflation decreases the supply of capital but does not increase the supply of resources like food and such and does not decrease the demand for them. So it would not increase the true buying power the working class has. It would just disincentivize those with capital from investing in industry that could increase supply of food and such and instead people with excess capital will just hold on to their money.
The root of your concern is that the working classes buying power has been decreasing for decades which decreases their quality of life. The root cause of this issue is that supply has not been able to keep up with demand. The causes of this are large and varied depending on if we are talking about food, housing, or medicine etc. Inflation is one of the few tools the government has to cause industry to grow which will hopefully increase the supply of resources. Unfortunately there are many more factors in regards to supply and demand, and demand is increasing faster than supply.