Usual argument why inflation is necessary:
In case of deflation, if the price of everything goes down, people won't spend their money, because they will rather wait, and that is bad for the economy.
Good response (idea came from TheGuySwann (npub1h8n…rpev) ):
Inflation is a result, not a cause.
The price of the things can be defined as:
Price = "Amount of money" / "Amount of goods"
So inflation occurs as a result if either the amount of goods decrease (gdp) or the amount of money increase (money supply).
If we fix the money supply (amount of money), deflation can only occur if the amount of goods increase, so when the economy grows. So deflation means the economy is growing.
Now what is the problem with deflation then?
CodePsychology / Code & Psychology ⚡️
npub1r6…03kh5
2023-10-19 21:29:10
Author Public Key
npub1r6wcp84fd7xhyflsvqjlf63d6s0fgfkyyakedfc8wzv8eqqn6gwqp03kh5Published at
2023-10-19 21:29:10Event JSON
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"content": "Usual argument why inflation is necessary:\nIn case of deflation, if the price of everything goes down, people won't spend their money, because they will rather wait, and that is bad for the economy. \n\nGood response (idea came from nostr:npub1h8nk2346qezka5cpm8jjh3yl5j88pf4ly2ptu7s6uu55wcfqy0wq36rpev ):\nInflation is a result, not a cause. \n\nThe price of the things can be defined as:\nPrice = \"Amount of money\" / \"Amount of goods\"\n\nSo inflation occurs as a result if either the amount of goods decrease (gdp) or the amount of money increase (money supply).\n\nIf we fix the money supply (amount of money), deflation can only occur if the amount of goods increase, so when the economy grows. So deflation means the economy is growing.\n\nNow what is the problem with deflation then?\n",
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