Why would deflation be bad for the average consumer?

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docmims's picture
docmims
Status: Platinum Member (Offline)
Joined: Jun 17 2009
Posts: 644
Why would deflation be bad for the average consumer?

Ok I get that for a deflationary spiral it usually means unemployment is sky high, and the money supply is supposed to contract.  However would lower prices help consumers?

I'm new and having a difficult time getting a grasp of the deflation concept as a doomsday kind of thing.

Thanks

Lemonyellowschwin's picture
Lemonyellowschwin
Status: Platinum Member (Offline)
Joined: Apr 22 2008
Posts: 547
Re: Why would deflation be bad for the average consumer?

Yes, deflation is great for the average consumer.

The reason deflation is so bad  for the system as a whole is the level of debt in the system.

It all goes back to Chris's theme that the economic system must continually expand.  If it does not expand it then it contracts . . . possibly violently (unless bailed out).  This is all because of debt.

But, for the average person (not leverged, and with a job) deflation is peachy.

Inflation can also be peachy too, depending on who you are. 

FinPro's picture
FinPro
Status: Bronze Member (Offline)
Joined: Oct 20 2009
Posts: 49
Re: Why would deflation be bad for the average consumer?

The average consumer is in debt.  So, given that income falls in rough proportion to price levels, I believe the answer is 'No'.

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Re: Why would deflation be bad for the average consumer?

No money.

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