“But deflation can hurt economic growth, as consumers will delay purchasing products if they think they will be cheaper in future.”
Not if people are already mostly only buying what they need to survive.Which is not the case for most people and certainly not the case for businesses and banks.
You’re being downvoted but the amount of people I see in my work and personal life that barely make ends meet but are buying garbage on Amazon constantly is staggering. Prime days especially I was shaking my head at people bragging about the deals they got.
I don’t even think you need to go to that. The vast majority of spending is discretionary. Is Jeff Bezos new yacht an essential? Deflation is particular bad for workers because it means less investment and lower salaries for those with a mortgage that’s even worse. The people that benefit are those with huge stockpiles of cash.
This only really applies if it isn’t just temporary though. It’s also pretty for central banks to fix.
Huge stockpiles of cash seems a rather useful thing in all situations, to be fair.
Individually sure but as a society we want investment into productivity stuff rather than just increasing bank accounts.
So this economy was design to feed dragons, and then depend on those dragons spending money for the majority of people to even survive.
They don’t need to spend money but you want them to have to invest money and not just profit by keeping their money in cash.
Using the word “deflation” like it’s a bad thing for citizens to be able to afford the things they need to live. That’s capitalist propaganda for you. We’re only happy when the blessedly wealthy get to have a good life.
You don’t see how it’s a bad thing for people to have zero incentive to put money back into the economy? Everyone hoarding money and trying to spend as little as possible will surely have good results!
People still need things, just because their money is getting more valuable doesn’t mean they’re gonna skip this weeks groceries, the next haircut, car repairs, etc. This isn’t a problem that’s going to grind an economy to a halt, especially a command economy. The more worrying thing for China I’d imagine would be the total exports dropping which is also supposedly happening.
That grocer likely has loans which are now much more expensive in real terms. Same with the farmer who sells their goods to the grocer. The manufacturer of parts to repair cars also has them. With deflation, all of them bring in less money but have increased real costs. So they cut costs by paying workers less or more likely laying them off. It’s good for banks though. They have loans out that now get amazing returns and can simply stop loaning money out because just having the money sit their provides a pretty good return.
It’s hilarious to see: Most Capitalists (or atleast those who are not actively opposing fossil fuel industry) complain about Doomers for the climate, but the moment the line stops going up you guys become Doomers yourself.
I have seen how capitalists scream when the line stops going up. But I never see capitalists suggest changes to how the economy is setup to avoid this phenomenon. I don’t trust people who can’t be objective when their baby has made a booboo.
I’m not even sure what you’re taking about it. But from the worker/anti capitalist perspective, deflation is even worse. The working class, who holds huge amounts of debt like student loans, ends up paying more as the value of money decreases. Imagine all of your student debts increasing in real value over time, on top of the already existing interest rate.
So long as unemployment stays relatively stable, deflation might be a good thing for us. If unemployment rises significantly as a result of deflation, then the discounts we’d get might not be worth the lost income. Since employers control employment in the lack of unions, they hold the power to remove income from workers to offset the falling profits that result from deflation. I wouldn’t mind extra deflation if I lived in a union country.
Youth unemployment is already really high in China. With deflation, you could expect unemployment to also rise in other age groups.
Deflation is a bad thing. It also doesn’t necessarily mean things get more affordable for people.
It’s a serious issue and is not good for the country or the people in the country.
In fact it’s usual that the central banks main goal is to stop deflation. That’s why central banks are usually separated from government policy also. Deflation is such a huge concern the central bank can overrule the wishes of the government and put in measures that will lead to a recession. Deflation is worse than recessions.
Economics is a lot more complicated than all the memes on this website of. Capitalism bad, communism good.
Deflation is a bad thing
In theory. In reality and for the wealthy, the average person is fucked either way today.
Only somebody ate up with the cancerous ideology of capitalism would say something so ignorant. I’m sorry, son. You’re terminal.
It’s not my fault you don’t like something you don’t understand. That’s true ignorance. Try educating yourself. Go watch a YouTube video or something on why deflation is bad.
Not the OP you were talking to, but I have to object to what you say is ignorance, even though you might be saying it about OP specifically. You probably think everybody thinks of deflation like this.
Deflation is bad -> I believe this is true. But that’s not the point.
The current economy is setup this way to make anything other than rampant consumerism and aggressive capitalism a country-destroying phenomenon -> This is what irks people. The rich and powerful have setup a shitty rube-goldberg machine that makes their lives better at the expense of the commonfolk, environment, and everybody else’s sanity.
I get your point. But I see what you have said as two independent points.
The way the world is set up deflation is a bad thing, pretty unanimously.
But unrelenting capitalism is a bad thing I agree. But it’s separate. Is kind of like saying “we need to get better at football by kicking the ball better” but then saying “the game is stupid you should be able to use your hands”. I agree the game is stupid but I wouldn’t disagree in the rules of football being better and kicking makes you better at the game, even if the rules should be changed.
Me personally. I have a degree in economics and I don’t see governments or international relationships working without a strong basis on capitalism. But I also agree that the system is at a point where capitalism has created enough wealth in the economy something needs to be fundamentally changed. People should work less, spend less (but buy better quality, reparable products), have more community, correct the market this strong externalities and even maybe UBI.
But I’m not celebrating depreciation and reduced consumer spending because the world we are in that means it’s a bad thing.
Maybe you should worry about your steady diet of bootleather before you worry about me.
It’s a bad thing because the economy slows down and companies have less income, which means less pay for the workers.
Yer it wont trickle down!
Companies have been making record profits for years and wages have stagnated, which means less pay for workers.
Your employer also makes less which means a lay off or reduced pay. It’s good for banks though since they make good returns on existing loans and do not have to lend it any new money to see good returns. Glad you want things to be good for bankers.
That only applies when the employer isn’t riding high on the profits of price gouging and wage theft. Bankers and CEO can lick the dirt off the bottom of my shoes before I grant them an ounce of compassion.
No, that applies to all fucking business. Grocers, for instance, make very little off what they sell. Farmers make an even smaller profit margin. Hitting them across the board with lower revenue while their fixed costs are still largely the same is a recipe for them going under and the bank seizing the assets.
Calling for deflation is literally having compassion for bankers. So good on you, mate. Keep on licking the boots of those bankers.
The only way anybody could be this ignorant and think they’re the good guy is if they’re a bad faith actor. Fuck all the way off.
You’re the one calling for helping out the fucking banks via deflation, you dunce.
They are calling out the system entirely, you have just missed that point and tried to jump on a ‘gotcha’.
I agree with you. These capitalists spit on climate activists calling them doomers and even worse terms. But the moment someone suggests that it’s ok when the line doesn’t have to go up always… it’s pitchfork time.
But they won’t because people are expecting prices to drop even more. Food and necessities, sure, it’s kinda nice this month for that, but washing machines, a new TV? Better next month. And then the next. And then you don’t have a job any more because you’re working at a washing machine factory and nobody’s buying them and the economy is going under.
Deflation being bad is one of those (rare) instances where mainstream economics actually is right. Of course inflation is bad, too, but there’s a reason central banks tend to set targets just a percent or two into inflation: That’s way better than risking deflation.
I don’t know if deflation itself is that harmful or if it’s just a symptom of economic troubles, i.e. lack of demand. In any case, if it persists, that’s not a good outlook for the Chinese economy.
Both, it’s a positive feedback loop, and in the end it doesn’t really matter what started it once the economy crashes you’ve gone through multiple lack of demand -> prices fall -> even more lack of demand iterations.
The current rounds of layoffs in the last couple years have noting to do with people not buying washing machines from the washing machine factory… It has to do with the washing machine CEO saying that we have too sell 200% MORE washing machines this year compared to last OR we’re going to call that “nobody’s buying washing machines”.
You’re quoting theory while ignoring the failed reality around you.
No washing machine factory has lost any money, they just didn’t make as much profit as they hoped for - even then, plenty of them are seeing record profits and still doing layoffs and raising prices to consumers artificially to exploit the pandemic profiteering moment and juice their stock price.
What I described is independent of CEO behaviour. It’s also not actually about washing machines, it’s about money needing to circulate and consumers not consuming stopping that. How China got itself into the situation is irrelevant, what matters, on the business side, is the sudden lack of liquidity as the company’s source of income dries up while costs (wages, anything fixed even if you shut down production) continue.
What you say about CEOs might be true – but then China is a command economy. It could just order CEOs to cut the shit. The comrades in the central committee, in all their wisdom, apparently only want to harden the Chinese people against hardship that’s why they’re crashing the economy it is for the betterment of the nation and the success of socialism.
And then you don’t have a job any more because you’re working at a washing machine factory and nobody’s buying them and the economy is going under.
We don’t have alternative jobs in 2023! Everyone whose not a millionaire or richer needs to get their asses on the factory floor!
Yeah because I totally was talking about washing machines.
Unless China’s mode of production changes very quickly, deflation will probably be a bad thing; in a capitalist system, labour is also a commodity not immune to deflating.
Unlike commodities though, labour tends to take exception to this happening.
I’m not reveling in China’s issues, I just don’t want to celebrate an imaginary win just because capitalism sucks.
It can be good if you have cash and need to buy things. It can be bad if your retirement savings is a second or third condo that is dropping in value.
it seems the ideal situation is stagflation, no-one is worse off. i have no idea why a small amount of inflation is considered ideal
i have no idea why a small amount of inflation is considered ideal
Because it encourages money to participate in the economy. If an economy gets stuck in a deflationary cycle, it encourages people to stop putting their money into the economy to invest or to act as a way to get people to make purchases sooner.
That can be ideal if you are anticonsumption, but not so much if you are relying on a low unemployment rate to help keep people happy.
that’s a good explanation, thanks
If the deflation is just a market correction after exaggerated inflation (retailers raising their prices more than general inflation to increase their short term subs) then it’s no big deal. Prolonged deflation can be bad, as that causes too much saving and not enough spending, which can really hurt the economy and people because of how it takes money out of circulation.
In an economy, the more money can circulate, the more good it can do. I use my salary to pay for for and things, that money then pays the employees of the businesses I went to, and those employees also spent that money, and so on. At each step, both participants normally get a net benefit: I can eat, and the employee can also spend the money they get from me to eat, etc. As long as the money circulates, it keeps doing good. When it stops circulating, due to being put into savings, investments or real estate, it stops doing good (or it does less good). The cycle slows down or stops.
That’s why a small amount of inflation (maybe 1-2% ? Not sure what’s optimal) is actually healthy, because it puts pressure on people with money to spend it before it loses its value, instead of hoarding it.
This is the opinion of most macro economists today, but it’s not universally accepted. Macro-economics is not nearly as scientific as micro-economics, and some people will say that its models are just about who can tell the most convincing story (or the story that’s the most convenient for those in power)
There are some people who point out that things like electronics have been undergoing rapid deflation for decades and this has not caused people to stop purchasing them. The economy is a chaotic system and anyone who claims to be able to predict it’s outcomes is selling something
Electronics also have become vastly better for decades as the tech developed. The PCs I bought over those decades are magnitudes apart in performance, but washing machines? Sure they’ve become more efficient but in the grand scheme of things that’s peanuts, amortises over a decade maybe, at best. Stove? Sure induction is nice but it’s not like others don’t boil water basically as quickly. Why should I buy a new one now when I will get an identical product next month at lower price. And then the next… that is, as long as my machine doesn’t break down, during deflation, I just won’t buy.
In an economy as tightly controlled as China, how much does deflation even matter?
Also I wonder how everywhere else having inflation will interact with this. Is China just getting affected because the rest of the world can’t afford basic necessities anymore? The article kinda touches on reduced demand from countries with inflation abroad causing this, but also doesn’t really explain anything other than going “lower number is uh bad”
China has built out enough infrastructure where it really needs consumer demand to take over as a major economic engine.
Nah, that is liberalism. https://thenextrecession.wordpress.com/2023/08/02/china-consumption-or-investment/
it matters to the people whose lives it impacts, and they’re not going to be happy about the impacts… of course deflation can occur… they will try to use artificial means to control it, but they will still have to choose how to pay for things… they can’t produce things for free just because the economy is controlled… it’s a dire circumstance for them as their property market collapses, and unemployment is at insane levels… deflation is a nightmare in that scenario, because it is the further contraction of an already faltering market…
“Won’t someone think of the retailers?!”
God I wish my cost of living could deflate a bit.
Economists say its bad but I don’t believe them.
I don’t think you need an economist to understand why it can quickly lead to a runaway disaster… Imagine you see a car price going down every week by 1k, do you buy it this week or next week? The competitor what do you think they need to do to compete? Lower their price too but wait everybody is waiting for next week, so literally nobody is buying anymore … So as a company you just start to fire people or close shop as quickly as possible, so a lot of people are now on the market so their labor value also goes down, ie. the salaries are dropping… This tsunami of jobless people would they buy a car this week you think? So companies need to continue dropping the prices…
Except if you think even a few more depths about this… you would understand people have needs. I would be happy to buy a car now if I need it now and can afford it. Your argument only works for goods that are not a necessity to life.
Sounds like an investor’s problem.
I buy a car if I need a car, not because I want to opportunistically ride the market dips so that I’ve eked out a profit once the economy’s gone back to being unsustainable.
Besides, consumers get ripped off by bad deals all the time.
Imagine seeing a car price go up every week. Interest rates go up a full point every 6 months. Next month you might be able to afford it but next month it’s gone up 4k and another point.
Companies are making money and people keep buying cars so they keep increasing prices.
I get your point but when you as a person are removed entirely from the equation then you no longer have a stake. How many Americans have no savings, no investments and work a miserable job that doesn’t pay the bills? Do you think they give a fuck if it all comes crashing down? They probably do but a lot less than everyone else.
Exept the government swoops in and gives a cash injection
My last two brain cells dying after seeing half of the comments saying that deflation is actually good.
To be fair… us common folk keep hearing stuff about the economy… but the only outcome at the end of the day is we get screwed in higher prices, lower wages, fucked up climate for our kids. People get tired pretending this Economy isn’t rigged by wall street and the U.S Govt or people close to it.
This is the best summary I could come up with:
The Chinese economy is expected to have slipped into deflation amid signs of a faltering post-pandemic recovery, according to market forecasters.
This means retailers who stocked up on goods expecting a surge in demand after pandemic restrictions were lifted are now under pressure to cut prices.
Homin Lee, senior macro strategist at Lombard Odier, predicted July’s CPI inflation report could show “outright deflation”, with prices slightly lower than a year ago.
In the UK, consumer prices were 7.9% higher than a year ago in June, as households suffered a long run of falling real incomes.
Trade data released on Tuesday showed that China’s imports and exports both fell more sharply than expected in July, adding to concerns over the world’s second-largest economy.
Jim Reid, strategist at Deutsche Bank, said the trade data highlighted that the Chinese economy is being “dragged lower by weakness in global demand and a domestic slowdown”.
I’m a bot and I’m open source!
What’s up with this weird jump in cpi? And what did China do Differently to us to not have high inflation?
They didn’t pump hundreds of billions of dollars into the free market?
Look at the 5 year view to see the jump
Do you think china’s market is free? If so, the stated owned companies are the ones carrying the debt. Not sure how different that is to a state having the debt.
https://www.cnbc.com/2021/06/29/china-economy-charts-show-how-much-debt-has-grown.html
And what about my other question. Where does this jump come from?
Turns out, it’s advantageous to loan out money when global interest rates were dropping to about 0. Who woulda thunk?
What are you talking about? China was never at 0% interest. What does that has to do with the previous comment?
The principle being, lower interest rates lead to more debt because spending is less expensive.
Democracy is always superior to authoritarianism, long term. Regulated capitalism is always superior to state owned and directed business.
Where is this regulated capitalism? Is that when the politicians are financed and then hired by the industries they’re supposed to be regulating?
As ever, “authoritarianism” just means when non- white countries elect people that white people don’t want them too.
When was Xi Jinping last elected by the people?
March of this year.
High fives all around!
Lmao gattem
And who elected him? The people of China or his cronies?
The people of China
Source?
Democracy is always superior to authoritarianism, long term.
That’s why people’s democracies are rapidly developing while western dictatorships of the bourgeoisie are in crisis.
“Democracies” have delivered a constant train of ‘once in a lifetime’ recessions that China’s regulated capitalism has somehow managed to avoid.
No, they haven’t. China got hit just as hard in the 2008 recession as most western countries, and they’ve been robbing Peter to pay Paul ever since. Eventually Peter gets his due, and China will suffer a serious economic setback. You’re starting to see signs of that now. China right now is Japan in the early 1990s. Everything from the inverted population pyramid to the looming debt crisis points to the next decade being very flat for China, and their wolf warrior diplomacy hasn’t made them the kind of friends that could help pull them out of it.
That’s not to say that western capitalist markets couldn’t stand to be significantly more regulated, because they absolutely desperately need more regulation around safety, negative externalities, and anticompetitive behavior. But claiming that China hasn’t experienced recession is preposterous. They’re too economically coupled with western economies to not suffer alike as recessions hit.
After the 2008 financial crisis, the Chinese government and state-owned banks pumped something like a trillion dollars into the economy, cushioning the impact of the recession. That was one thing they actually got right.
On the other hand you have Great Chinese Famine, Tiananmen Square massacre and more recently Uyghurs concentration camps and most likely genocide and that’s only China.
You mean the Last Chinese Famine? The famine that took place in a country with a multimillennial history of devastating rice famines? The famine that was less bad than other, contemporaneous famines in capitalist countries? The famine that marked the last instance of food insecurity for about half a billion people?
What might have caused that?
Guess we’ll never know.
And haven’t you got the last update? We’re not doing Uyghurs any more, just ask your state-controlled media:
The deradicalisation program was a success and has now finished, and all these guys:
Are now plumbers or electricians (or doing lucrative speaking tours through US “”““intelligence””“” circles)
Shame about all those horrible crimes that were comitted by the Chinese government though:
Good thing there have never been famines, political violence, or persecution of minorities in “democratic” countries…
The whole thing is bullshit. The famine was sixty years and like four major government upheavals ago. Tianmenen square is the most overhyped government repression in history, and it’s never mentioned that many of the casualties were unarmed PLA soldiers burned alive, and the insurgents that attacked them when armed PLA units were able to respond. And of course while there were human rights violations in Xinjiang, they are absolutely not the human rights violations people think they were, and the whole thing was part of a campaign to suppress insurgent groups and needs to be compared to the West’s “bomb weddings and ambulances” strategy, to say nothing of the genocidal campaign in Yemen that recently concluded. It’s all ignorance, totally unselfconscious indoctrination, and general bs.
Yes, I too subscribe to popular fiction.
https://en.wikipedia.org/wiki/1989_Tiananmen_Square_protests_and_massacre#Death_toll - I would like to point out that as much as they try to obfuscate it even the wiki admits that ~300 is the only credible number, and most of that was street fighting when insurgents attacked PLA troops with molotovs and firearms, with the death toll including unarmed PLA troops burned alive in their trucks
I know literacy is a lot to ask of anyone these days but you can in fact just read the UN report here - https://www.ohchr.org/en/documents/country-reports/ohchr-assessment-human-rights-concerns-xinjiang-uyghur-autonomous-region
China is the most democratic country in the world, full stop, with around a million elections every year.
Muray Rothbard called but it’s just incoherent screaming because he’s in hell for the sin of ideology.
