[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...

[nadahalli]

You are on the wrong forum my friend.

Austrians and the HN community talk past each other because it's not easy to get the latter (which I am a part of) to see that their large salaries in FAANG companies are partly due to the Fed largesse.