Post
Topic
Board Economics
Re: Is deflation truly that bad for an economy?
by
johnyj
on 06/03/2015, 03:09:39 UTC
All of these problem of deflation is based on one assumption that fiat money's value is constant, and it is used as a benchmark of value, which is not true

For example, when you see a house's price going up and everything else's price keep the same, you think it is the house become more valuable. But the reality is your dollar worth less and everything else also worth less against that house

Why people stubbornly use fiat money as a benchmark of value, like using meter to measure length and using minute to measure time?

If you give up the belief of absolute value of currency, then all the claimed problems of deflation will disappear: When price of something drops, the purchasing power of the currency is increasing, means productivity is higher thus everything become more and cheaper, people will spend more, just like when bitcoin reached $1200, the amount of spent bitcoin is highest

On enterprise side, although the amount of currency they earn decreased, but currency appreciated, their real income will increase, salary become cheaper, they could hire more people and drive larger projects. This also happened when bitcoin price reached $1000+, lots of projects were setup back then

So, the claim of deflation's negative impact is just based on a stubbornly hold belief that currency is a benchmark of value. In fact the whole modern monetary theory is constructed on this blind belief