[prichino]

This deflation is bad meme comes straight from the big international bankers of the early 20th century (JPM et al.). They cared mostly about liquidity and stable exchange rates. Unless you are one of them, please stop parroting "would be extremely bad". Would it be different from now? Probably. Extremely bad? For whom?

[prewett]

People who have debt is the canonical set for whom deflation would be bad Including everyone who has a mortgage: your payments stay the same, but you earn less, so they take up a larger portion of your income. Naturally this can lead people who have debts that they could have serviced without deflation now cannot service them, so they go bankrupt. This also happens with any company that has debt (which is pretty much all of them).

The Great Depression is frequently seen as having been an ordinary depression made worse by a deflationary spiral. So for whom would it be bad for? Everyone.

[NumberWangMan]

Ok, so full disclosure -- Austrian monetary theory makes sense to me in a way that no other form of macroeconomic theory has since. I'm open to being convinced that monetary inflation is a necessary or good thing, but I haven't yet.

Most of the arguments I've heard seem to take the form of -- we've been doing this thing (increasing the money supply) and if we stop, everyone who has debt is suddenly going to be in a lot of pain. I get that, and I agree, it makes sense.

Maybe you or someone can help me out here -- what I don't get is why we need to keep increasing the supply of money in the first place. Forgetting the situation that we're in at this point (where we don't want to stop increasing the money supply), what bad thing would happen if we had said from the start: here's the number of dollars, that's it? If we have more people, those dollars will get more valuable, because more people will want dollars. If we have more goods, those dollars will get more valuable, because they'll be scarcer relative to the goods.

I've heard and understand the argument that people don't like having their salaries cut, and that's something that would have to happen sometimes if money kept getting more valuable. But I don't see how that's really a big issue. Companies that paid their employees too much, and ran out of profits, would simply go out of business, no? The employees would then look for jobs elsewhere, and the market would be paying a bit lower. After a certain amount of time, I expect business owners and employees would get used to the reverse of the current situation -- you get a pay cut every year, unless you're increasing your value to the company, in which case you keep the same salary (or maybe get a small raise). It feels like the whole sticky wages argument is kind of based on claiming that the average citizen is like a child that thinks that water in a taller, thinner glass is more, which, while I'm sure is true for a few folks out there, doesn't seem to me like a good enough reason to do something as drastic as deciding that we need to continuously increase the money supply. People very clearly understand that with inflation, you may get a raise and still be poorer.

If "sticky wages" were the only consideration, maybe it would make sense to increase the money supply, sure. But I think the Austrian economists have a good argument that doing so adds an external factor into economic calculation that makes planning for the future harder -- you now not only have to try to predict how the prices of goods and services and so on will change due to supply and demand, you also have to factor into your prediction any distortions due to the central bank's changing monetary policy. Keeping the money supply static turns one big variable into a constant.

[prewett]

I think the usual argument for expanding the money supply is that you want to target for a small amount of inflation (I think the Fed targets 2%) to avoid deflation, since the deflationary spiral is a huge problem. Also, historically populations have been increasing, so you'd need more money just to keep the same amount per person. I'm not financier, but an (ideally) constant 2% inflation seems low enough to not be a problem for wages, but also predictable and plannable. Most investing calculations take into account inflation, and a constant 2% is a easy to include in the calculations.

[dnautics]

"People who have debt" is dominated by financialized instruments: shorts, options, forex, margin trading, etc. all exist due to easy access to debt at low interest rates.

[notahacker]

"People who have debt" is dominated, surprisingly enough, by people with debt. There are a lot more people with mortgages than people making leveraged trades.

For the rich loss of an opportunity to cheaply leverage their wealth is the gain of opportunities to lend their wealth at usurious rates instead, or to profit at the expense of the productive from simply selling off their assets and doing nothing with their cash but wait for the price to fall so they can buy stuff back for less.

For ordinary people whose net worth is mostly tied up in a property that's falling in value but not in mortgage repayments and whose wages are about to be reduced, the opportunities are less exciting. (Sucks for the rich trying to run companies rather than just letting their investment manager allocate their wealth to whatever grows it best in the current climate too)

[dnautics]

You're counting domination in number of people. I'm counting domination in number of dollars.

[imtringued]

Deflation is bad enough that it collapsed every single implementation of the gold standard.