[landemva]

OP said he or she is upset with price inflation and now has a pile of cash losing purchasing power.

arcticbull said '... you would have been a lot more furious at the Fed in the event they had sat back during COVID and presided over a deflationary spiral ...'

Deflation makes cash have more purchasing power, so arcticbull your speculation is wrong. Completely backwards.

[arcticbull]

I'm aware, however a mortgage also requires a job to obtain, which was what I was pointing to in the statement. Unless we saw truly spectacular deflation, I'm talking 500% year over year, it wouldn't have mattered. I suspect OP would have lost their job well before their admittedly less than 20% down-payment amount deflated enough to buy a house outright.

I suspect anything in between would have led to a huge spike in interest rates making borrowing yet less affordable no?

> Deflation makes cash have more purchasing power, so arcticbull your speculation is wrong. Completely backwards.

>> Can't get a mortgage if you're out of work, ya know?

So no, not really... unless you stopped reading before you got to that sentence ;)

[dnautics]

why do you assume a deflation will cause job loss, in particular for the poster? Maybe they have a deflation-proof job (most jobs that aren't a result of malivestment). Deflation is not a magic wand where "boom, it happens, and people lose their job". Just as, much as the central bank might wish it to be, inflation is not a magic wand where "boom it happens, and jobs are created" (hence the word "stagflation").

[deelowe]

There is a gigantic difference between inflation and deflation from a policy perspective. Deflection has a positive feedback loop which does tend to cause situations where liquidity dries up literally overnight and then "boom, it happens, and people lose their jobs." Inflation tends to happen more gradually. It's manageable as long as people don't lose confidence in the currency. The fed generally wants to avoid deflation if at all possible. As people leave the job market due to automation and median age trends higher, this because more and more difficult. Japan has had serious struggles fighting off deflation for decades now.

"stagflation" is simply what happens when inflation keeps up with deflationary trends. It doesn't mean monetary policy is doing nothing. It likely means it's working as intended.

[dnautics]

Surely you're kidding, right? If inflation didn't have a positive feedback loop we wouldn't have the hockey stick exponential devaluation as seen in: Venezuela, Yugoslavia, Zimbabwe, Brazil, etc...

> Japan has had serious struggles fighting off deflation

But the CPI in Japan hasn't gone down, if anything it's gone up more years than it's gone down. Moreover, in what way is Japan terrible? Due to less inflation, there's less income inequality. Maybe deflation isn't bad.

[bb88]

Gentle inflation is what the fed targets. Out of control inflation is what you're talking about.

In an inflationary economy, people spend their money quickly, since it's worth less sitting around. In a deflationary economy people hoard cash because the value of cash just increases in the bank. Why invest in anything (companies, labor, capital investment) if your money just earns 10% in the bank?

If enough people do that jobs disappear, as they realize they don't need to market any new product or service to make their money.

FWIW, they call that period in Japan "The Lost Decade(s)" https://en.m.wikipedia.org/wiki/Lost_Decades_(Japan)

[dnautics]

Yeah I'm very familiar with it not the least because I'm of japanese extraction and have relatives my age living the lost generation: it's a lost generation because instead of letting crap companies/crap bosses die, due to fear of deflation, they bailed them out with monetary and fiscal stimuli, making working salaryman jobs meaningless for an entire generation of young Japanese people. What the fuck is the point of trying hard when your connected, incompetent competitor or your incompetent boss is going to get bailed out anyways?

[arcticbull]

The wage-price increase cycle is the kind of inflation the Fed attempts to control. Runaway inflation/hyperinflation is much more associated with a loss of faith in the government and a total systemic collapse.

[deelowe]

I covered the examples you cited already. Rampant inflation happens when people lose faith in the currency. That isn’t what’s happening here.

[dnautics]

How do people lose faith in currencies? You start by devaluing them. What are some symptoms of people losing faith in them? They start flocking to currency alternatives. Widespread grassroots popularity in cryptos should probably be some sort of warning sign: The people know that they can't get rich using dollars, the investment game is rigged, so it's worth it to try and 'stack' strange assets, even if they're constantly being warned that those assets are peri-legal by the authorities...

[landemva]

'spectacular deflation, I'm talking 500% year over year ...'

If currency loses 100% of value, it will be worth zero. A complete, 100%, total loss.

A 500% loss would be spectacular! And not possible using commonly accepted laws of the universe such as math.

[pvitz]

You are confusing deflation with inflation.

[landemva]

A dozen yummy donuts experience 100% increase. A double so you now have two dozen yummy donuts. Inflation.

A dozen peaches experience 100% deflation. They completely 100% go to zero. There are zero peaches. They are gone.

What would 500% deflation do? Using regular math and experiences with donuts and peaches, what happens at theoretical 101% deflation? And 500% deflation? How can something be reduced more than 100%, the point at which it already disappeared?

[pvitz]

I am not talking about the rate, but rather about your sentence: > If currency loses 100% of value, it will be worth zero. A complete, 100%, total loss.

Inflation is about the loss of value, not deflation. 1£ today will be worth x£ tomorrow, where x < 1.

[diatone]

Just confirming I’m on the right page here, what about supply and demand? Doesn’t inflation increase the quantity of cash in existence, reducing its value relative to other units of exchange, and vice versa for deflation?

So for example, a 500% deflation just means that one dollar today buys $6 worth of whatever it could have bought in the past (my math might be off)?

[betterunix2]

The economic consequences of deflation are very destruction. Cash may become more valuable, but a prolonged economic contract will leave you with less to buy with that cash.