Why Americans feel gloomy about the economy despite falling inflation and low unemployment
Why Americans feel gloomy about the economy despite falling inflation and low unemployment
Inflation has reached its lowest point in 2 1/2 years. The unemployment rate has stayed below 4% for the longest stretch since the 1960s.
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"falling inflation" means prices are still rising...the rate of increase is what has decreased. What we need is negative inflation...or said differently, price decrease.
You don't actually want that. It encourages people to "invest" by sticking hard cash in a mattress. It rewards people for doing absolutely nothing but taking money out of the economy.
Ideal (if we're keeping a monetary exchange society, anyway) is low (<3%), predictable inflation combined with wages increasing in proportion to productivity. We had a period of relatively low inflation followed by a giant spike, plus wage gains that are nowhere near matching productivity gains over the last 50 years, and that's where things hurt. Capitalism doesn't seem capable of this, however, as it's always chasing the next hype cycle that leads to these spikes and lulls.
As opposed to what we have going on right now, which is to punish working class people so ruling class people can still have prosperity.
Deflation means stagnation or crash in economic terms
Cool, working class people aren't really thriving right now anyway. Maybe an economy crash could result in a restructuring of wealth and new tax policy.
Sure. I don't believe in infinite growth either, I'm unsure however who'd come up on top. The new aristocracy?
And yet it is exactly what the people need to be happy
Meditate on that point
For every economic problem, the burden falls on the working class. Deflation makes people unhappy, high inflation makes people unhappy, and low inflation is the "best" because things get worse more slowly. Capitalism only helps workers when large enough innovations happens. Otherwise, the owners capture all the benefits of growth, or squeeze the workers to make the appearance of it.
The majority of people are in debt. If you owe $1000, you'll still owe $1000 but $1000 will be more money than it is now.
If prices drop then you have more money to pay for that 1000 dollars is how proponents are looking at it, i assume
You don't though. Wages don't rise to keep up with inflation, but they'd sure as shit drop to keep up with deflation.
"falling inflation" means prices are still rising...the rate of increase is what has decreased. What we need is negative inflation...or said differently, price decrease.”
Im not arguing validity, but just commenting on how i think people en masse will hear what top comment actually said.
You very well may be correct. But it requires the inclusion of wage change which the top comment didnt include. Minimum wage is a protection against employers lowering wages. So for those who are already at that minimum, they will be in a better position
Assuming they still have a job. Which im sure you would argue they wouldnt. And i wouldnt bet against you if you did argue that would happen
People have always been, in the grand sense, pretty dumb.
Wages need to keep up with inflation, else it's a bubble. 😉 But we fundamentally agree
What you are describing is deflation and it's only happened twice during the history of the United States. It is also generally looked at as a bad thing.
Is inflation generally looked at as a good thing or a bad thing? Ive only ever heard people complain about inflation.
If they are both bad things im willing to give the bad thing that improves my life a try over the bad thing that makes everything more expensive.
Granted i have nothing so im probably on the side of things that is least effected by the bad side of deflation.
If i can spend more money on the things i want to, it will absolutely help small local businesses near me
A small amount of inflation is healthy. You REALLY want to avoid deflation, because that means the value of your money is increasing. If people know their money will be worth more in the future, they won't spend it, incentivized to save and sit on it. That means on average everyone spends less, slowing the economy down and starting into a recession/depression.
Gonna slap this with the good old "I am not an economist" disclaimer, juat what I remember from economics class in high school
Only problem that right now people also may decide against buying because they can't afford it. Also, I'm not sure world is producing goods at a healthy rate either, more like we've got a bit of an overproduction
Yeah, obviously wages SHOULD be keeping up with inflation and inflation should be a low, stable amount. That's the problem, not inflation in general.
What you learned in high school puts you miles ahead of 99% of these comments
People still have to spend money, hoarding wealth makes no sense if you can't eat and pay for services and utilities.
Hoarding wealth isn't a thing. See my above comment.
The idea is that deflation affects the investor class. Assuming a "healthy" 3% inflation rate, the value of your savings decreases by 3% per year. That means you lose money if you can't invest in something earning more than 3%. Traditionally interest rates have been around 0%, which means bonds and savings accounts also pay 0%. So, your only options to not lose the value of your savings is to invest in the stock market, risky businesses, or real estate.
As a middle class person that means that it mostly affects my 401k, but for millionaires and billionaires, deflation means that they would sit on their hoard instead of investing it. Traditionally that means no funding for new businesses, inventions and ideas, and that's also why the investor class pays much lower taxes than the working classes.
But nowadays "investment" seems to mostly be buying good companies and enshitifying them or bribing politicians, so maybe it would be better if we encouraged the rich to sit on their money instead of using it to make society worse.
I have no idea what this is in reference to
Japan has been struggling with deflation (=decrease of prices) for a good 25 years now... you really don't want that happening. Ideally you want something around 2% inflation.
What are the issues with deflation other than that people wouldn't want to invest in whatever is available?
You also shouldn't purchase, since goods will get cheaper over time. Also don't take loans for the same reasons. Basically you should take your money in cash and sit on it.
That falls apart with necessities like food and medicine, doesn't it?
Those are considered inelastic goods, yes. They are also way too small an amount to keep an economy going. Most things we spend money on aren't like that, and demand going down like so will affect markets; companies not producing necessities or for export will fold if it lasts too long, etc.
Deflation is a death spiral. China is going through it rn. The currency gets stronger, but then people wait to buy stuff like houses because it will be cheaper in a few months. It creates a snowball effect as people all start holding off on buying and selling stuff, wanting the best deal possible, or then being unable to buy things if people hold off on selling.