Deflation

[iwillhodl]

I can be saying something wrong, but isn't deflation a good thing? Let's think from the point of view it just makes things balanced, it's a natural event that shows the market what is needed and what isn't needed anymore on the market... So you won't produce something that others are already producing, you will have to find a new product/sector to work with.

In my opinion what isn't a solution is to incentive people to spend more money than they have and to incentive the population increasement without control (common weapons to beat deflation). What do you think?

Deflation in fiat money makes more people save money instead of investing. Why should millionaire invest money in any business, when value of his money is growing for nothing? It causes worse economics in country when no one is investing, and when we go further, prices will go up instead of falling long term in deflation what will make more people poor. Very low inflation is also very good for any country. It's about money used everyday and about masses. But when we talk about value holder, like gold or btc (this is how I treat btc at this moment with this price and those fees, value holder) deflation is good because everyone wants to buy and no one wants to sell, there is no way to create it and it makes price to rise. So inflation can be bad or good, same deflation, depends on currency we use and the way we treat it, spendable money or value holders.

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[metenjean]

I think most meaning of deflation can be found if you google it enough with a bit of extra efforts but in common deflation means the decrease of price for consumer goods and services mostly done because lots of supply pumping while there are no purchasing power or people starts to saving money that resulted in low cashflow. Most common example nowadays happens in Japan where deflation has already been a problem until now for almost 20 years if i'm not mistaken. It all started with japan asset bubble in 1990s which bursted out, any more information should be easy to find it you google when the japan deflation started.

[Canis Majoris]

Usually developed countries fight deflation. deflation is actually the inverse of inflation. In short, the amount of money is reduced, the value of money increases and the prices decrease. There was a major deflation in Japan at the beginning of the 2000s.

Deflation is not the opposite of inflation or its mirror image with a minus sign attached to it as many people here seem to erroneously think. Under inflation, the interest rates have a premium added to the inflation rate, which is kind of obvious. For example, when the annual inflation rate is equal to 3%, you could well expect that the interest rates would be somewhere around 7%. Of course, they may be higher or lower but you get the point. But this is definitely not so with deflation even if you try to invert everything.

Under deflation, you can have like 3% annual deflation rate (-3% inflation), but that doesn't mean that the interest rates will be like -7% or just negative, so you could borrow money in a bank and the bank would pay you interest on the borrowed funds or you could return less, which is essentially the same. The interest rates even under the most severe deflation will always remain positive for the borrowers, no matter what actual deflation rate might be. And thus your real interest rate may be huge.

This is one of the reasons why deflation is not an inverted version of inflation and why its effects on the economy are so detrimental if it persists. In these circumstances, people as well as businesses are discouraged from borrowing which leads to a decline in economic activity and ultimately to a recession. It doesn't make sense to invest money because you can just sit idly on it and wait till its value rises without doing anything productive.

[mrcash02]

I can be saying something wrong, but isn't deflation a good thing? Let's think from the point of view it just makes things balanced, it's a natural event that shows the market what is needed and what isn't needed anymore on the market... So you won't produce something that others are already producing, you will have to find a new product/sector to work with.

In my opinion what isn't a solution is to incentive people to spend more money than they have and to incentive the population increasement without control (common weapons to beat deflation). What do you think?

Deflation in fiat money makes more people save money instead of investing. Why should millionaire invest money in any business, when value of his money is growing for nothing? It causes worse economics in country when no one is investing, and when we go further, prices will go up instead of falling long term in deflation what will make more people poor. Very low inflation is also very good for any country. It's about money used everyday and about masses.

Ok, but what makes people save money instead of investing? Where does the problem start?

But when we talk about value holder, like gold or btc (this is how I treat btc at this moment with this price and those fees, value holder) deflation is good because everyone wants to buy and no one wants to sell, there is no way to create it and it makes price to rise. So inflation can be bad or good, same deflation, depends on currency we use and the way we treat it, spendable money or value holders.

So you are saying in asset's market the deflation pushes prices down, but it's fastly pushed up again as the number of buyers (demand) increase instantly and the disponible coins (supply) is limited. Different from real economies, deflation doesn't break asset's market.

Then the problem isn't deflation itself, right? The problem is that people don't have interest in buying or investing on their local businesses and stuff when the prices go down for any other reason.

[crypt0heaven]

We always hear about economies collapsing due to inflation. Can anyone give me one example of an economy collapsing due to deflation?

Cannot give you a good example. The only deflationary assets we have are precious metals and those can theoretically be found in outer space the more we explore. So there will never be a deflationary asset like bitcoin.

[orkoso]

We always hear about economies collapsing due to inflation. Can anyone give me one example of an economy collapsing due to deflation?

Cannot give you a good example. The only deflationary assets we have are precious metals and those can theoretically be found in outer space the more we explore. So there will never be a deflationary asset like bitcoin.

There are many deflationary assets dude! Many of the newly created ALTs have a limited supply, so by your theory, these are deflationary. But that is just an example.

[Canis Majoris]

We always hear about economies collapsing due to inflation. Can anyone give me one example of an economy collapsing due to deflation?

Cannot give you a good example. The only deflationary assets we have are precious metals and those can theoretically be found in outer space the more we explore. So there will never be a deflationary asset like bitcoin.

There are many deflationary assets dude! Many of the newly created ALTs have a limited supply, so by your theory, these are deflationary. But that is just an example.

Personally I never believed in the scarcity story. There are quite a few altcoins which have limited supply and which could be called deflationary. But does this alone make them any more useful, for just being scarce? To me, this idea is not valid and legit. Though someone has actually tried to exploit the idea of scarcity producing value and created a coin dubiously called 42-coin. They claimed each coin should be worth 1 million dollars because the total supply would be only 42 coins. And what do you think? In the end it turned out to be just another shitcoin.