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US annual inflation declines to 7.1% in November vs. 7.3% expected

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Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#31

Post by monero-xmr »

ChuckNorris89 wrote: post #17
Wowfunhappy wrote: post #7

Earlier quoted context omitted.

Yes, if things were actually getting cheaper that would be "deflation" and it would probably be bad.

Can someone please school me on why that would be bad?

When considered logically the correct amount of inflation should be 0% - neither inflation nor deflation. This would give us stable prices and make it much easier to calculate what is increasing or decreasing in price without this other fuzzy “inflation” metric affecting it. However governments / central banks have convinced us that 2% is “correct” despite no evidence or research. It does help them print money and bail out governments, however!

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#34

Post by francisofascii »

ChuckNorris89 wrote: post #17
Wowfunhappy wrote: post #7

Earlier quoted context omitted.

Yes, if things were actually getting cheaper that would be "deflation" and it would probably be bad.

Can someone please school me on why that would be bad?

During the Great Depression they had 7% Deflation, but of course the depression probably caused the deflation which perhaps made the depression worse.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#35

Post by mikewarot »

Reminder: Inflation is a vector, not a scalar. Ignore the abstraction at your own risk.

Inflation is the rise in price of every single item for sale across a market, not just the "basket" of goods selected to be a good example, and subject to adjustment and correction over time.

It is entirely possible that inflation that averages out to 10% for a year may double the cost of living for some people, and actually make things cheaper for others.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#36

Post by avbanks »

ChuckNorris89 wrote: post #17
Wowfunhappy wrote: post #7

Earlier quoted context omitted.

Yes, if things were actually getting cheaper that would be "deflation" and it would probably be bad.

Can someone please school me on why that would be bad?

It's actually nuanced, deflation CAN be bad, but most people seem to interpret that as ALL deflation is bad.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#37

Post by geye1234 »

runako wrote: post #24
ChuckNorris89 wrote: post #17

Earlier quoted context omitted.

Can someone please school me on why that would be bad?

If the expectation is that everything will be cheaper next month than this month, that creates an incentive for everyone (and every business) to delay purchases as long as possible (because they will save money buying in the future). When everyone slows spending at once, it can lead to severe a recession or depression.

Perhaps for businesses this may be true. It's hard to imagine for a consumer. I'm not going to delay the purchase of groceries, a fridge, a new roof or (if I'm feeling rich) a new car just because they may be 3% cheaper next year.

I'm not saying this conventional wisdom is wrong, but it's not obviously right.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#38

Post by slg »

monero-xmr wrote: post #31
ChuckNorris89 wrote: post #17

Earlier quoted context omitted.

Can someone please school me on why that would be bad?

When considered logically the correct amount of inflation should be 0% - neither inflation nor deflation. This would give us stable prices and make it much easier to calculate what is increasing or decreasing in price without this other fuzzy “inflation” metric affecting it. However governments / central banks have convinced us that 2% is “correct” despite no evidence or research. It does help them print money and ba…

0% inflation would mean there is no penalty for sitting on your money. People putting their cash under their mattress instead of in savings accounts, CDs, bonds, and the like is bad for the economy. That is why economists generally prefer a small positive rate of inflation. It adds more incentive to both spend and invest.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#39

Post by bryanlarsen »

ChuckNorris89 wrote: post #17
Wowfunhappy wrote: post #7

Earlier quoted context omitted.

Yes, if things were actually getting cheaper that would be "deflation" and it would probably be bad.

Can someone please school me on why that would be bad?

Prices on most goods, services and wages are fairly sticky for psychological reasons. So suboptimal prices are likely to persist longer than they should. Inflation provides a mechanism for price movement by making the real price of a "constant" price continuously decrease. If that's the right direction it's an invisible helper, if it's the wrong direction it forces the increase to happen more regularly.

Re: US annual inflation declines to 7.1% in November vs. 7.3% expected

#40

Post by cjbgkagh »

ChuckNorris89 wrote: post #17
Wowfunhappy wrote: post #7

Earlier quoted context omitted.

Yes, if things were actually getting cheaper that would be "deflation" and it would probably be bad.

Can someone please school me on why that would be bad?

Rich people won’t be getting as rich, they’ve spent a lot of money and time convincing people that that would be bad for everyone. Also they pay for the media and politicians who decide which economists get attention. As far as they’re concerned inflations is only a problem when wages are going up (their input cost) at which point the media and establishment screams bloody murder.
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