Deflation, explained
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- เผยแพร่เมื่อ 4 ต.ค. 2024
- Deflation: also known as falling prices. Falling prices may sound like a good thing - stuff gets cheaper. But fall too far, and they can cause a lot of pain, as this short video explains. #MarketplaceAPM #Deflation #EconomicExplainers
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That was the quickest and most effective way of explaining deflation i have come across. Thank you !
Anyone watching this during corona virus panic ?
Instead of cash people hoard toilet paper ffs!
@TheFinalBoss correct. This is scary!
A lot of people having those drinks right now...not me!! gotta stay healthy sober and ready for what's next.
So I'm hording money, waiting for the stock market crash... I'm part of the problem 😔
Good....I thought I was going down the “tin foil hat” road. I’m glad I’m not the only one seeing this.
Deflation is only a bad thing if it's caused by a dangerously large bubble or banking panic. We should implement the Friedman rule and the Chicago plan.
Soooo.. Should we be panicking now?
@@milesp3624 or elect Ron Paul in 2012. . .
chicago boys oh no, how to spot you are an american
Deflation mixed with corruption means the rich would buy everything up leading to more inequality if things do ever re-balance.
Surely this would only be an issue if the money supply stayed constant...
If you reduce the money supply, and you reduce the prices then everybody gets wealthier than they would have been.
ROTFL the most hilarious deconstruction of MMT that I've ever read. Well done!
What a moron you are. Thinking that there is such an easy way to make people wealthy instantly. We would have achieved world peace by now if that was the case.
@@amobilway1032 but we can inflate and cause people to become less wealthy? logic.
How would you explain the consistent deflation for almost a century during the Industrial Revolution? How would you explain the falling prices in consumer electronics; those prices have been falling for 20 years. I know my iphone will be cheaper next year, but I still bought it this year. This whole idea that deflation is bad is the other side of the coin, that says inflation is good, which is a con perpetuated by central bankers who only really have one tool in their tool box, which is to print more money.
dropping prices =/= deflation...
Jeah, and he didn't explain were deflation is comming from. It is all based on the assumption that people will buy less goods and services because prices going down and therefor having a chain reaction in the economy. So why are the prices going down? How does that happen on a global scale? I think for instance it could be something like a new industrial revolution were goods and services can be made in mass for cheap. Just like AI is around the corner and will do the same. But cheaper goods and services is not a reason for people to stop buying. That is a complete bullshit story. We buy cheap goods form china all the time. Same story with inflation is wrong, The idea that we will stop investing when there is no inflation is not knowing humanity. People will always want more. That means more money, more stuff, more power. That is how we work. Without inflation, lets say 0% people would still invest because they make much more then not investing. And when there is deflation and cheaper goods. It is not a matter 'if' they will buy something, but rather how much they can buy with the money they have, this can be 'more stuff' or 'better quality'. Also inflation is far worse for the economy then people not investing. In all western country's the workforce isn't holding up. House prices are to high, Young couples can't have kids without a home, No new young people, the group of old people not able to work gets bigger. Without a workforce your economy crumbles. To save it you need to raise more taxes. Many left wing goverments also has crazy idea's so they loan more money to realize them, They need to pay back that money, so they raise the taxes on every working citizen even more. The workforce will flee the country because taxes are getting out of hand and they can't start family's....
sooo, Stop usless goverment spending. Stop the prime source of inflation...
@@Dorone525 Agreed
The most helpful learning source ever! Thank you so much, mate Paddy Hirsch!
Veronika Iliopololou Thanks Veronika!
This video literally just presents a bunch of shitty metaphors while teaching you nothing. Check out Ray Dalio's "How the Economic Engine Works" for something with enough substance to at least make sense.
i know bitcoin is deflationary and the value mathematically talking will always keep going up,
but my question is will it maybe go to much up that nobody wants to produce anymore products?
@@sam_180x That's just stupid. You can't eat or live in a Bitcoin.
@@dowskivisionmagicaloracle8593 if a system with 2% anual inflation works, a system with 2% deflation should also work, go watch the video 10 MILLION DOLLAR BITCOIN END GAME.
I disagree, if there is anything to learn from people is they that any time they have money they will spend it. If deflation increases your purchasing power, rest assured people wont sit waiting for a higher gain. Honestly, the real reason deflation is “bad” is because banks can’t lend money that easily
That may apply for people with lots of money in their banks but how about those who don't have enough and who lose their jobs? How about the business owners who wouldn't want to spend more money due to a decrease in money supply? If their money is limited then they will have to pay their employees less or worse, more lay offs.
Never we have ever depended on the supply of money, if momey supply is short its value will increase and spending will adjust accordingly, even if the same 100 will become 110 the next year. Some people will try to use it as an investment, but at some point everyone has to spend. Even millionaires hold their assets for some time, and then they sell, think about shares, they start costing cents and their value increase, but when a share costs thousands of dollars then people simply buy a minimal fraction of it. Nothing goes to waste, and economists always find the way around
@@leooram1959There are so many factors you forgot to consider. I was also asking the same question myself and I couldn't find a good answer so I asked chatgpt about it and this is when everything becomes clear to me why deflation is really a bad thing.
I asked. "So why would deflation be a problem for businesses if the value of their money gets higher? Wouldn't deflation help them pay their expenses more easily since the value of money is high?"
chatgpt response:
That's a good question. While deflation does increase the value of money, making each dollar worth more, it can still pose significant challenges for businesses. Here's why:
1. Reduced Revenue
As prices fall, businesses may have to sell their goods and services for less. Even though the value of each dollar is higher, the total amount of money coming into the business can decrease if customers pay less for the same products. Lower revenue can lead to less profit, or even losses, making it harder for businesses to sustain themselves.
2. Customer Spending Behavior
During deflation, consumers may delay purchases, expecting prices to drop further. This behavior can reduce sales volume, making it harder for businesses to move inventory and generate income. Lower sales mean businesses earn less revenue, even if the value of money increases.
3. Debt Burden
Many businesses operate with some level of debt, whether from loans, bonds, or credit lines. Deflation increases the real value of debt, meaning businesses have to pay back loans with money that's worth more than when they borrowed it. This can be particularly burdensome if their revenue is decreasing, making it harder to cover debt payments.
4. Cost Pressures
While deflation can lower costs for some inputs, not all expenses decrease at the same rate. For example, fixed costs like rent, salaries, or long-term contracts might not adjust downward as quickly as prices for goods and services. This imbalance can squeeze profit margins.
5. Wages and Employment
In a deflationary environment, businesses may struggle to maintain payroll expenses, leading to wage cuts or layoffs. Lower wages can decrease employee morale and productivity, and layoffs can further reduce overall demand in the economy, creating a negative feedback loop.
6. Investment and Innovation
Deflation can discourage investment and innovation because the expected return on investment decreases when prices are falling. Businesses may be less likely to invest in new projects or technologies if they anticipate lower future profits, potentially stalling growth and competitiveness.
In summary, while deflation does make money more valuable, the negative effects on revenue, customer behavior, debt, costs, and investment can outweigh the benefits. This is why deflation is generally seen as a problem for businesses and the economy as a whole.
@@leooram1959 And also based on history, we can tell what the effects of recession are. It is a deflation. Extended recession = prolonged deflation = Depression.
I asked chatgpt:
Me: What is deflation in economics? Please explain it in a way that a 7 years old child can understand.
ChatGPT:
Deflation is like when the things you buy, like toys or candy, get cheaper over time. It’s like when a store has a big sale and lowers the prices. So, if you have the same amount of money, you can buy more stuff because everything costs less. It’s the opposite of inflation, where things get more expensive.
Me: What makes deflation a bad thing?
ChatGPT:
Deflation can be a bad thing because it can cause people and businesses to hold onto their money instead of spending it. When prices keep dropping, people might wait to buy things because they think they’ll get even cheaper later. This means businesses sell less, which can lead to them making less money, paying their workers less, or even having to let some workers go.
If a lot of people lose their jobs, they have even less money to spend, which makes the problem worse. So, while lower prices might seem good at first, deflation can hurt the economy and make it harder for everyone to find work and make a living.
Me: What is a recession?
ChatGPT
A recession is when the economy slows down for a period of time. It means that people are buying fewer things, businesses are making less money, and there might be more people losing their jobs.
In simple terms, it’s like when a playground gets quiet because fewer kids are playing. During a recession, fewer people are “playing” in the economy-buying things, working, and making stuff-so everything feels slower and less lively.
Me: Is recession related to deflation and depression?
ChatGPT
Yes, a recession can be related to deflation and depression, but they’re not the same thing. Here’s how they are connected:
Recession: This is a period when the economy slows down. It means less buying and selling, and sometimes people lose their jobs. It’s like a temporary dip in the economy.
Deflation: This happens when prices of goods and services drop over time. It can occur during a recession because when people spend less money, businesses might lower prices to encourage sales. While deflation sounds good because things get cheaper, it can actually make a recession worse. If people expect prices to keep dropping, they might wait to buy things, which can further slow the economy.
Depression: This is a much more severe and long-lasting economic downturn than a recession. It’s like a really bad and prolonged recession where a lot of people lose jobs, businesses close, and the economy struggles for a long time. The Great Depression in the 1930s is a famous example.
So, while a recession can lead to deflation and even contribute to a depression, each term describes different aspects and severities of economic problems.
Me: What makes a healthy economy?
ChatGPT:
A healthy economy has several key characteristics, like a well-balanced diet for a person. Here are some important aspects:
Strong Growth: The economy grows steadily, meaning businesses produce more goods and services, and people have more money to spend. This growth is often measured by the Gross Domestic Product (GDP).
Low Unemployment: Most people who want a job can find one. This means that businesses are doing well and need workers, and people have money to spend on things they need and want.
Stable Prices: Prices for goods and services don’t change too quickly. This means there’s no big inflation (where prices go up too fast) or deflation (where prices go down too fast). Stable prices help people plan for the future.
Reasonable Interest Rates: The cost of borrowing money isn’t too high or too low. This helps people and businesses get loans for things like buying a house, starting a business, or investing in new projects.
Healthy Trade: The country exports (sells to other countries) and imports (buys from other countries) a balanced amount of goods and services. This helps businesses grow and provides people with a variety of products.
Good Infrastructure and Services: Roads, schools, healthcare, and other services are in good shape, helping people and businesses to function well.
Innovation and Productivity: New ideas and technologies help make things better and more efficient. This can lead to more products, better quality, and lower costs.
When these elements work together, the economy is like a well-oiled machine, providing opportunities for businesses and people to thrive.
Me: Is a slow and constant deflation good or bad?
ChatGPT:
A slow and constant deflation can be problematic for an economy, although it’s less severe than a rapid deflation. Here’s why it can be a concern:
Potential Downsides
Reduced Spending: If people expect prices to keep falling, they might delay buying goods and services, thinking they’ll get better deals in the future. This can lead to lower consumer spending, which slows down economic growth.
Decreased Business Revenue: Lower prices can reduce the revenue businesses earn. If companies make less money, they might cut costs by reducing wages, hiring fewer people, or even laying off workers.
Increased Debt Burden: Deflation can make debts more expensive in real terms. If prices and incomes are falling, the value of money increases, making it harder for people and businesses to pay off their debts.
Investment Hesitation: Businesses may be less likely to invest in new projects or expansion if they expect lower prices and lower returns in the future. This can stifle innovation and economic growth.
Potential Upsides
Increased Purchasing Power: For consumers, deflation can mean their money goes further, allowing them to buy more with the same amount of money. This can be beneficial for those on fixed incomes.
Encourages Savings: With deflation, the value of money increases over time, which can encourage people to save rather than spend.
Conclusion
While a slow and constant deflation might seem less harmful than a sudden drop in prices, it can still pose significant risks to economic stability. The primary concern is that it can create a vicious cycle of reduced spending and investment, leading to slower economic growth and potential job losses. Most economists and central banks aim to avoid deflation and instead prefer a low, stable rate of inflation, which helps encourage spending and investment.
Me: So why would deflation be a problem for businesses if the value of their money gets higher? Wouldn’t deflation help them pay their expenses more easily since the value of money is high?
ChatGPT
That’s a good question. While deflation does increase the value of money, making each dollar worth more, it can still pose significant challenges for businesses. Here’s why:
1. Reduced Revenue
As prices fall, businesses may have to sell their goods and services for less. Even though the value of each dollar is higher, the total amount of money coming into the business can decrease if customers pay less for the same products. Lower revenue can lead to less profit, or even losses, making it harder for businesses to sustain themselves.
2. Customer Spending Behavior
During deflation, consumers may delay purchases, expecting prices to drop further. This behavior can reduce sales volume, making it harder for businesses to move inventory and generate income. Lower sales mean businesses earn less revenue, even if the value of money increases.
3. Debt Burden
Many businesses operate with some level of debt, whether from loans, bonds, or credit lines. Deflation increases the real value of debt, meaning businesses have to pay back loans with money that’s worth more than when they borrowed it. This can be particularly burdensome if their revenue is decreasing, making it harder to cover debt payments.
4. Cost Pressures
While deflation can lower costs for some inputs, not all expenses decrease at the same rate. For example, fixed costs like rent, salaries, or long-term contracts might not adjust downward as quickly as prices for goods and services. This imbalance can squeeze profit margins.
5. Wages and Employment
In a deflationary environment, businesses may struggle to maintain payroll expenses, leading to wage cuts or layoffs. Lower wages can decrease employee morale and productivity, and layoffs can further reduce overall demand in the economy, creating a negative feedback loop.
6. Investment and Innovation
Deflation can discourage investment and innovation because the expected return on investment decreases when prices are falling. Businesses may be less likely to invest in new projects or technologies if they anticipate lower future profits, potentially stalling growth and competitiveness.
In summary, while deflation does make money more valuable, the negative effects on revenue, customer behavior, debt, costs, and investment can outweigh the benefits. This is why deflation is generally seen as a problem for businesses and the economy as a whole.
The Market has been pretty bad. Everybody is Practically Crying. It keeps dipping. That's what you get when you feel you can navigate the process in your own. Big thanks to Mrs eva heather . I'm not bothered with how bad the market is because my assests are insured due to her advice and I still receive my profits >
she's definitely the best. She keeps surprising me with results. We are planning on surprising her too. You must have heard about that.
You invest with Mrs Heather too? wow that woman has been a blessing to me and my family.
I think she trades for everybody I know. Met her twice at a conference in Germany, after her lecture I had to personally beg her to be my Finacial Advicer. I celebrate her strong feet.
I also make huge profits in stock market by trading with her weekly, her consistency is crazy
@@lopezwilliams5599 You can reach her on Tele
I like how every video ends with needing a drink (cheers)
Best explanation I've seen
Thanks Zak.
I am Canadian. Qualified for CERB. Saved 90% of it. Went back to work, never have I saved before until now. I am a textbook case of an individual who would cause deflation. The virus made me more interested in economics.
So isn't a slow deflation generally a good thing?
Good explanation thanks to the simple, but yet powerful visual example.
Thanks!
Yes I second that, thank you :)
It's hard to believe Deflation can occur with all this printing dollars and giving them away. I am more concerned that people will refuse to accept the dollar as payment if this trend keeps up. US Money supply was at an all time high of $4 Trillion a year ago and now it's $18+ Trillion and Joe says he wants another $2 Trillion "Infrastructure" spending.
US infrastructure is dogshit that literally wastes US's income potential in the trillions. Connected and well functioning societies are efficient and productive societies... infrastructure is extremely important.
@@calin6327 Infrastructure "spending" is always a top priority for the electeds, then they spend on shit we don't want
I'm investing into Bitcoin and an argument someone made against Bitcoin is deflation and now I'm here doing research on deflation. Trying to find an argument against Bitcoin being a good investment but honestly deflation doesn't sound as bad as inflation. Inflation keeps me from reaching high places in life financially but deflation doesn't necessarily do that to me if I work in a business that is constantly selling and I do as a farmer.
Yes I understand that if someone can't afford your crops than it does affect the farmer but no matter what they are always going to have to buy that food some way somehow. And I just feel like jobs such as farming and food really keep deflation from becoming a bigger issue than it could be.
I think that deflation is very good in long term!
I love this! Simple, straight forward, and a little funny. Thank you! :)
Thanks for explaining that. My problem only problem is that, ive never witnessed that type of deflation. All I see is prices increase and increase. Maybe Petroleum is the exception.
cant believe i understood it within 2 mins. kuddos sir!
Great explonation, i didnt like the sound of marker when writting, it is pretty annoying for my ears!
lulzim fazlija get over it loser
Yes so cringy
deflation : money is created by banks as debt with an interest attached. the interest does not exist to pay on the initial principle created, the system survives only with inflation more new money being created to continue the interest payments. when their is not enough new money being created the entire money supply contracts .... banks who issue loans to create money go bankrupt as their loans go un-paid. what money existing becomes much more valuable, prices fall because the supply of goods is too much for the money in the economy. a supply and demand equation, where they meet is price. during deflation more and more money gets destroyed as more and more debts go un-paid, lending freezes leading to lower prices as the market is in desperate search of the bottom, wages fall, unemployment rises, asset prices fall, those assets were pledged as collateral for loans in past and for current new money, this all feeds the avalanche. 2008 was an example. people used homes as money creating machines, when they went down in price banks all froze as they were all bankrupt, it took the central bank to print TRILLIONS and governments to run massive defcits more TRILLIONS to replenish the destroyed money/banking system.
may also raise the real value of debt?
Yes absolutely
Every explanation I've ever seen about why deflation is so bad is presupposed on the premise that "people will stop buying things because they'll wait to see if prices go down", which has always sounded like bullocks.
Lecturer: "She wigs out."
I can dig it.
Here's an easier explanation for people in the comments section. *2008 crisis = Deflationary, 1929 Great Depression = Deflationary, 1987 crash = Deflationary, 2000 dot com bubble burst = Deflationary. 1979 gasoline crisis = Inflationary, Weimar Republic = Inflationary, Venezuela crisis = Inflationary, Zimbabwe crisis = Inflationary.* Too much deflation or inflation causes serious problems on the economy, but inflation is easier to fight against versus deflation. 2% inflation is good and makes sense, otherwise few people would buy stocks, real estate or invest in anything. People don't always understand the dynamics of supply and demand.
so how would you describe our economy right now? is it deflation or inflation? i see signs of deflation everywhere with jobs only hiring part time and more and more people being counted out of the workforce but yet prices aren't dropping. food prices are going up. so is it possible to have both because that wouldn't make sense to me. can someone explain?
MrOodlesnNoodle 'JL' I would say INFLATION. Sure the price of some goods are falling (gas) or holding steady (food), but services are rising in price: cable bills, insurance premiums etc. And those are higher-ticket items. That's because companies are having to pay their workers more.
@@marketplaceAPM your reply was that "core inflation" was rising, right?
Super. Thank you
Paddy Mate you're a GOAT. Great explanation
Funny how he mentioned TV's and cars instead of more important things ... like food!
Exactly, it’s a fallacy!
Is there a real example of the negative effect of deflation?
thank you, Sensei!!
Very well explained.
Nice analogy. thank you!
But if prices go down on basic goods like milk, veggie’s or meat, how is that a bad thing? He is talking about televisions and cars, but how often are people buying cars or tv’s? My vehicles are from 2014 and 2016. My last televisión purchase was in 2019. I doubt these purchases were impactful enough to have helped to keep the economy going.
very good explanation, thank you
What happens after that freeze? Like what's the smartest play with your money during that time?
Why is this seen as a negative thing? People dont use their capital to buy things, because they dont have any, they use credit.
Thanks for the explanation. I have a question: one of the main arguments for Bitcoin is that it is a deflationary currency whose value continues to increase rather than decrease over time. For this reason, more and more people think it's a good idea to jump on the Bitcoin bandwagon. But isn't there a greater macroeconomic danger in doing so - or is there no danger at all, as long as there is a 'normal' fiat currency like the dollar available to 'normal' people, while super-rich Bitcoin czars indulge in the promised land of financial freedom?
Think of Bitcoin as the Bottlecap currency they have in the Fallout videogames. The concept of scarcity and the idea that it will have "value" as long as people are willing to trade for it. If everyone stopped paying attention to bitcoin and decide is no longer valued for trading, it will lose all its value. Like i said. As long as people view value in it, it will hold.
@@ricreusaurelius4163 Exactly like art, collectables, gold or even USD. They also will stop having value if people stopped caring for them. Except with USD people with guns would start showing up threatening to put you in jail if you didn't start using USD again.
This is making perfect sense
This idea is based on the assumption that folks won’t buy stuff under the ( again) assumption the prices will continue to fall. Two too many assumptions in that equation mr paddy
This is a great explanation!
The only thing i can relate with deflation is AAA games developer selling half-price from pre-order after a month of low sales
Well, that's the consensus anyway. How anybody believed that is a mystery to me. How many people wait even a week to buy the latest iPhone or other techno gadget even though they know the price will fall in six months, a year? I understand how the theory originated though. It originated in a time before consumerism, when people "mended and made do". It was quite plausible to reason in the 1950s that if prices started to fall, people would defer their purchases. That world ended generations ago. Very few people alive today even remember it. Now in the age of rampant consumerism and instant gratification, only the most miserly would stop buying things they wanted, in the belief that the price would drop. Everyone else would seize the chance to get the latest and best.
Vincent Causey: just in case you are interested, everyone I know waits two years before buying the new iPhone which makes it an old iPhone, save a bunch
The baseline state of a competitive market without monopolies is deflationary. Human curiosity drives technological innovation, enhancing efficiency. This, combined with consumers constantly seeking "more for less" and entrepreneurs striving to stay competitive, results in deflationary pressures on prices across all sectors. Ultimately, prices should fall to the marginal cost of production. If this premise holds true, I am compelled to question the collective conviction that monetary inflation is a necessary component for a functioning economy. To be more direct, why do we endorse a system where a certain loss in purchasing power, akin to a hidden tax, is deemed essential and undemocratically imposed upon us? Could it be that we find ourselves entangled in a conflicting paradigm? One where the exponential growth of technology, promising efficiency and deflation, clashes with the perceived need for inflation to stave off economic downturns, especially in the face of seemingly unsustainable levels of debt.
Your videos are really good and informative
1)Can you prop up industries if you focus spending in a particular area for a period of time? Say a country with 22million people, how many people do I have to convince to focus spending in an area to prop up that area before we move to the next. 2) in which order of industrie gives the best opportunity for an economy to grow?
I love deflation.
what if instead of falling fast, it falls slowly without rising. all the things happen but, since company's know having too much stock is bad and wont sell, the company focuses on quality rather than quantity, and since less products are sold less often less money is brought to the businesses (laying off people), hopefully those unemployed create their own business creating competition focusing even more on quality and production so you have all these small businesses competing. and the people who hoard the money, that money is taken though tax and used for hospitals schools and roads, so it go's back into the economy. (i know nothing about economics but its just and idea.)
Good question. Can anyone answer? I was thinking the same thing.
just here for the artistic magnificence
At laaaaaaaaaaaaaaast now i got it ... now i have to dig further to know when does that happen and what is the relation between deflation and interest rates ?
Mohamed Afify this one took me a long time too. Almost seems strange I had such a hard time. But Americans in my generation have never really experienced wide spread deflation. It’s truly foreign. Aside from the cost of some goods going down because of efficiencies, we have only experienced inflation.
Let me ask you a question. Do you think deflation will effect the price of silver and gold so that it too goes down in price or with people hoarding cash would they possibly convert their dollars into gold or silver and feel extra safe? I'm very interested to see your response so I hope you see my question. A thousand thanks.
gold is not complete inflation protected, they mine 1% to 3% of all the gold stock per year,
so in 72 years the stock from gold doubles,
yeah of course the price still goes up because new people buy gold,, but its not completly deflationary.
bitcoin is mathematically talking made for always goin up in price, because there only exist 21 million bitcoin
💛Easy to understand thank you🙂
So... How can policy makers and central banks correct deflation?
-by increasing money supply as it will increase the purchasing power
-low interest rates on savings will make it less lucrative for people to save and so they might tend to spend
-higher gov expenditure so that more jobs can be created and so people might have higher purchasing power
-reducing taxes will increase the disposable income so ppl will be able to spend more
IMO, the assumption that average people would be hoarding money forever is an irrational fear of the establishment. Granted, it would certainly shake up the economy but it wouldn’t be all doom and gloom the way it’s being depicted here. Our values would change. For the better.
1) What about food? People would stop hoarding food supplies when there’s deflation.
2) People would get in less debt to begin with.
3) There’s more incentive to work sooner because your money’s worth will increase faster so you can retire earlier or start your own business sooner as well.
Extreme inflation hurts everyone, but I think an equal level of deflation would mostly hurt those in the non-essential sectors of the economy. An average deflation of 2% would actually be beneficial for a bigger part of a population and probably even better improve for general health in the long run.
Next time could you please explain that prices are not falling, but money is getting more dear. Most people seem to have no concept of how the money supply works. I think that if we refereed to 'money rising or falling in value' due to the changes in the underlying economy, it might help
does deflation not mean that less and less money can buy the same products at the same deflated prices? just like when currencies inflate, it just mean it will cost more money at inflated prices to buy something?
🔥
I wonder if people can have their current salary and but to buy the things which priced 20 years ago.
this guy writes backwards like a pro
Most of the scenario makes sense except for the very first thing. If prices drop , people will wait for them to drop more. I don't ever think this way , for inflation I am not going to rush out an buy something "now" because I am worried the price will be higher tomorrow. If I want a TV I am not going to wait a year for the price to drop. Unless it is something big like a house I want to buy. Funny I notice that when the price of houses in my town went up a lot. People were in a rush to sell their house to get the money , equity they made. The only problem is they bought a bigger house which also had increased in price , so they screwed themselves. You should always sell your house after there is a price collapse to buy a bigger house , because the bigger house will have decreased more in price.
I think this guy has a nice theory on deflation but is that what really happens? I think it starts when the money supply dries up , like in the great depression. Banks were afraid to loan or they went out of business. That happened first , then people had no money to buy things, then the products dropped in price when the buyers disappeared. Then companies laid off employees due to slowdown, then the laid off people stopped buying things completely which caused more deflation.
Money needed to be injected and people had to use it to buy things. The government should have given out free money in the form of coupons that would expire. so $1000 coupon to spend on goods that expires in 3 months , so they won't save it. Or the value could just drop every month by 5% to encourage people to start spending.
This youtube video, I have heard this theory of deflation 50 years ago and I don't think it is correct.
If a universal basic income could be arranged then nobody would need to be afraid that they won't be able to live when unemployed
@@Galaxia53 It doesn't work. That is what they had in the Soviet Union and no one wanted to work. There has to be fear. The fear can be reduced somewhat with Unemployment benefits but a universal income would remove all fear and no one would want to work. We can see this happening currently . People have saved so much money from the stimulus checks and just saving money , that they don't want to work or demand a lot more money , which will drive up inflation. The lady renting my house in Florida is a manager at McDonalds and making $35,000 last year and more this year. She has to work 18 hours a day because she can't get employees. Three people quit on her last week.
Take this scenario, Universal basic income is instituted and then everyone quits their jobs. You would have empty shelves and have to stand in line 5 hours to buy anything. This is what my wife's mother did in Ukraine. She was supposed to work 8 hours but the boss did not care and she only worked 2 hours so she could go the the market and stand in line for 6 hours to buy a bag of potatoes. My wife was a litter girl in 1985 and remembers standing in line everyday to buy things.
@@jeffbguarino What part of FLORIDA? Ik here in Miami-Dade people were quitting weeks after getting hired over the past year and half.
@@musak.4068 Kissimmee on Highway 192 near Encantada Resort.
@@jeffbguarino The cost of living is low up there that may have played a role in them being comfortable with quitting
That squeeky pen is worse than 2020 ecconomy
Fala Koala I think we were the only ones to look at this video in the last couple months
Not so fast. The fact is about 65% of Americans live hand-to-mouth regardless of income or economic policy. Inflation or deflation these people will spend.
You have to consider that inflation over decades is responsible for pushing the amount of said Americans to 65% in the first place.
Thanks mate ✨
Well explained!
well done thank you
I plan to retire or reduce my work hours in five years, and I'm interested in how others allocate their income between savings, spending, and investments. I currently earn about $175K annually but haven't built up much in savings so far.
There are numerous strategies to achieve high yields during a financial crisis, but it is crucial to undertake such trades with the guidance and supervision of a professional financial advisor to ensure informed decision-making and risk management
That's true. I've been assisted by a financial advisor for almost a year now. I started with less than $200K, and I'm just $19,000 short of half a million in profit
Nicole Anastasia Plumlee is the coach that guides, you probably might've come across her before I found her through a Newsweek report, she's quite known in her field, look-her up
great , thanks
Most people will buy thing quicker if there is a big discount (cheaper price), not the other way around.
Slide analogy was absolutely pointless
Anytime watching this during the biden price hike
A universal basic income would prevent people from getting scared and not buy anything. It doesn't solve the economy floating on consumption though.
He should stress that a small deflation rate per year is actually quite beneficial. It is when you see deflation rates at 5-10% a year for prolonged periods that it can be a disaster if wages don't keep up.
I think you mean inflation. Wages decrease in a deflationary period.
Control deflation help the working class
Wouldnt consumers buy more at the inicial low price? Instead of inventory pilling up i would think there would be no supply at all since everyone is buying.
Not really. At least not when they think it's a trend that will continue. Why buy a TV today at say $500 when next month you can get the same one for say, $375? Get yourself a new (cheaper) Xbox too while you're at it with the cash you've saved. In a deflation people want to wait for prices to get cheaper. In an inflation people buy as fast as possible before prices get higher.
@@googleminus1442 you don't know exactly when the price will go down so people will buy when they feel the need to buy it
@@hiphopheaven If the deflation is not meaningful or in this case consistent enough that people cannot be certain prices will drop in a reasonable amount of time then it is less of an issue. But of course, people don't only buy things they need.
Have you tried buying a GPU in the past 2 years or so? I for example have wanted buying one for more than a year now. Prices were high, but I know it will not last forever. I know it will drop. I already have a GPU, this was just an upgrade, so I wait. Prices dipped slightly several times in the past year. Still, I know it will drop more, and I do not need it immediately. So I keep waiting until early this year when I finally bought one when it has dropped to an attractive level for me. So did many others. Even though GPU prices are crashing back down these days, many are still waiting for it to drop even more.
This would obviously apply less to necessities like rice, cooking oil, etc, which is why in my example I used a TV. A TV is for entertainment. It is something people want, not something they need. If prices for a product or service has been going down for, say, the past 6 months, and there have been no relevant changes in government policy or other economic factors, then there is no reason to believe it will not drop again in the span of the next 6 months.
@@googleminus1442 Even for entertainment it's difficult to resist buying something you really want right now even if you know it will get a price drop at some point.I used to follow consoles sale regularly and people was still buying consoles even when the price was dropping in 2 weeks.
@@hiphopheaven Well now that we're getting into the realm of opinions and he says she says it becomes difficult. Different people have different capabilities in terms of delayed gratification. For one, in a real deflation, there are usually things that follow that will encourage people to save money. Sometimes wages stagnate, or real wages decrease when we compare it to inflation. But very rarely does nominal wage decrease. But let's say it does. Okay, your wages decrease. It's fine though, other prices decrease too, right? But wait, your mortgage doesn't go down. Bought a car with credit? That doesn't go down with prices of goods or wages. If you borrowed 10,000$ last year, and let's say prices of everything (including your labor, of course) somehow fell 50%, that 10,000$ debt is not going anywhere. It's not getting slashed down to 5,000$. In an inflation, that debt is equal to less and less work as time goes on. In a deflation, it equals more and more work. Because you're going to earn less and less, you have to start saving more and more. This causes demand to drop. Demand drops, revenues drop, and you know how the rest goes faster than we can spell "recession". Even if you spend that initial savings, this scenario will still occur if the deflation does not stop. In a deflation more and more income will in the wallets of those who lend others money compared to those who are borrowing or are indebted (who will be paying a bigger and bigger percentage of their paychecks as time goes on). Those who lend others money are less likely to spend compared to those who borrow money from others (after all, why borrow money that you're not going to spend?), and demand decreases anyways.
But what if this scenario is closer to reality? In the real world, there is such a thing as sticky prices, including the price of labor. And the price of labor is known to be sticky especially downwards in the nominal sense. Getting workers to accept decreasing wages is difficult. So when the prices of their product are falling but the workers do not accept their wages falling too what do companies do? They reduce costs in other ways. One of the biggest ones being slashing production cost. Lay off workers until you get to a manageable level in terms of of expenses. But of course in the larger picture, those workers laid off will still impact the company. Now they don't have a certain income every month. With companies laying people off left and right, who knows when they'll have another stable employment and fixed income? Weeks? Months? Years even? Better save that money, right? And that makes the spiral get even worse.
It's 2021 and I bet you guys that were all hoarding cash right now LOL
So basically deflation is having more products in the economy than the money available
But deflation steady and slow is far better than creating bubbles that burst.
deflation empower the individual, inflation empower the state
Hello Canada time to get educated what is happening right now! :D
Nobody hoards cash because things are getting cheaper. That’s a faulty assumption.
If more people can afford a product then how does that cause deflation witch is "bad". More people buy that product witch meens the company makes more money.
th-cam.com/video/7iWXPx7wjlo/w-d-xo.html
so, deflation is good, thanks
Why u start the story at the moment od deflation and explain what hapens next? Deflation or inflation is a result! So u should start grom skating the causes od deflation, for exmple, lets assume that there was a great year for vegetables and there are too many of them on the market which result deflation.
The marker is irksome
Cathie Wood predicts deflation now.
Deflation Is good for people period. People create saving less spending in the economy. It is only bad for the rich wealthy people who own too much assets. Since wealthy individuals own too much assets they then want to increase spending. However it will not happen unless they take their money to the bank as savings. The bank then schemes along with the governments permission on loaning the monies. So people should not save at a local bank unless your money will be returned with a better return than the markets (Dow, S&P, Nasdaq... Bond market). When the aggregate family decides to spend money then, inflation arises eg Boomer college years or family formation period.
The pandemic now along with the government helped burst the deflation period quickly which resulted in larger monopolies and many small Main Street businesses closing, Deflation formed in large scale cities where pop. Density was high. Meanwhile market asset deflation has not formed yet. However it is slowly approaching it’s transition from hi tech to the new and better resources mining economy.
Actually, there was no food prices deflation ... only some consumer electronics, but every time this happens, manufacturers stop selling the deflated product and replace it by the "modern" one. Thanks from Ukraine 2021! We, ukrainians, do know that inflation is much more distructuve, becouse it ruins your savings.
Agly noise
I am not agree with you.. if I am getting discount of 25% I can also thi k that it may go up sooner ..
Not gonna lie I'd rather live in this than our current economy
Are you sure? Do you have any mortgages? Debt? Your wages is a price too, if prices fall so will your wage, but your debt does not.
@@googleminus1442 No actually.
Great info but that dam marker noise 😖
This is what happened during the great depression. The monetary supply shrunk leading to a deflationary spiral.
It didn't shrink, the FRS just stopped the reckless money printing started on 1924.
@@alanhoff89 It was a Credit crunch meaning they were not letting anyone borrow money. They were strangling the economy because in the current monetary system there needs to be constant money creation and more debt for it be kept afloat.
Basically what he's saying is we can't have the average person ever saving money, they need to be working paycheck to paycheck to make ends meet and be forced to put on kneepads at the polls when an unexpected event occurs
What is good for an individual is not necessarily good for the economy of the many. What is good for him short term is not necessarily good for the long term. In a deflation he will suffer too.
@@googleminus1442 Get outta here with that collectivist talk commie
The dislikes on this video are because of the marker squeaking.
It's all a huge lie price going down doesn't effect the poor who have nothing to start with
guess what, you can go buy a big tv by saving up, but most people will prefer to use their credit cards with high interest rates, just because they want it today, instead of waiting and taking it more cheap without the interest, so this "people will see prices fall and not buy" is bs, that is not human nature, will it slow down economy? sure thing, but would not create bubble and recession as it does with todays economy. it will just grow slowly and lineal based on productivity, the way it should be on a free market.
Sound of pen is annoying
What a load of shit. Who says to themselves "oh I'm not buying that because u think it will be even cheaper in a year" no! They say oh this is the cheapest I've ever seen this product, better get it now before someone else does! And since when is saving a bad thing? You're saying it's better to blow your money and live paycheck to paycheck? Bunch of bs
Deflation coming May 2021!!
This should be recommended to everyone with sleepy joe about to be in office
so.....inflation is really bad......and deflation, which would be the opposite....is also bad.....yeah....makes total sense 0-0