>>70585258Think about it like this anon.
Why does deflation happen?
Well, inflation happens because people are getting their pay raised (somewhat), more money is being printed, and people are buying, thus companies move up the price a bit every quarter to get a bit more profit. Since pay somewhat matches inflation, it's not a huge issue and it's just "normal." This is why 2%-3% inflation is optimal, since it's a sign that all is well (people get paid, they're using it to buy, corporations raise prices cause pay gets a bit higher and they want more money, etc.)
Deflation happens because the consumers AREN'T spending. They have no confidence in the economy, and think that they should hog money and wait for "their chance."
Since people aren't buying, prices drop cause businesses want people to buy.
But people still don't buy.
This means businesses go under, logistical lines crash and they start cutting labor/volume of supply, factories close cause lack of demand, people lose their jobs cause of this, which means less people that have purchasing power to buy.
Which causes a feedback loop of the economy crashing onto its own weight like a house of cards. Think of supply and demand: when there is high demand, there is high supply. When there is low demand, there is low supply, so the economy just... stops producing. Or at least, starts reducing how much it produces so it doesn't overproduce.
tldr: deflation is bad because it means the consumers have no confidence in the economy. no consumers means businesses lose money cause no one is buying, hence shutting down factories and jobs to compensate loss of revenue. this leads to unemployment, which means fewer people buying. infinite loop of shrinking.
