Deflation slows down spending as people wait until things get cheaper. It is good for workers as their pay becomes worth more over time. If you have cash it is good for you, as it becomes worth more over time. However assets with variable pay out like company ownership it is bad. For people with debt it is even worse, as it becomes harder to pay it back.
Basically it is great for the middle class, which have no debt, but a steady save income. Even a mortage will be fine, as it would be a steady payment, while it is much harder for the companies to lower pay. For rich it is a big problem, as the value of the employee pay is going up, while their companies make less money from selling their products and they often have a lot of debt, which needs to be serviced. For the poor with a lot of debt it is a problem as well. Longer term more people saving cash, slows down consumption and investing, which slows down economic growth.
In other words, if you like degrowth it is a great policy.
Thanks I’m always a bit skeptical when it comes to big news corps framing financial stuff like this exactly because it can mean very different things for different people. And since I’m not a big corpo myself, I wonder whether they are right or not when talking about the effects on my personal life especially when the situation isn’t very extreme. Sounds like a small deflation for a short time doesn’t have to be a bad thing if you’re not in (high) debt, just like small inflation isn’t a bad thing even if you have some savings.
Deflation slows down spending as people wait until things get cheaper. It is good for workers as their pay becomes worth more over time. If you have cash it is good for you, as it becomes worth more over time. However assets with variable pay out like company ownership it is bad. For people with debt it is even worse, as it becomes harder to pay it back.
Basically it is great for the middle class, which have no debt, but a steady save income. Even a mortage will be fine, as it would be a steady payment, while it is much harder for the companies to lower pay. For rich it is a big problem, as the value of the employee pay is going up, while their companies make less money from selling their products and they often have a lot of debt, which needs to be serviced. For the poor with a lot of debt it is a problem as well. Longer term more people saving cash, slows down consumption and investing, which slows down economic growth.
In other words, if you like degrowth it is a great policy.
Thanks I’m always a bit skeptical when it comes to big news corps framing financial stuff like this exactly because it can mean very different things for different people. And since I’m not a big corpo myself, I wonder whether they are right or not when talking about the effects on my personal life especially when the situation isn’t very extreme. Sounds like a small deflation for a short time doesn’t have to be a bad thing if you’re not in (high) debt, just like small inflation isn’t a bad thing even if you have some savings.