Inflation is “falling” in the sense that it’s going up less fast than it was. It’s still rising, but at a slower pace when compared to the same period last year.
You seem unsure here about the difference between inflation and prices. Inflation is the rate of change of prices.
Positive inflation means that prices are rising. Inflation is falling because prices are rising slower than they were a year ago. You seem to think that ‘falling inflation’ would lead to falling prices - it would not.
Falling prices would be a very bad thing. That’s something called deflation and tends to be associated with economic crashes like the 1930s. If prices were falling, people would put off spending money on anything except essentials because they’d be able to buy things cheaper tomorrow, which tends to lead to a self-reinforcing economic depression and mass unemployment.
Deflation is necessary to revert to the correct mean of prices if they were not skewed by subsidies and other regulatory manipulation of the market. Deflation may be “bad” in the same sense that it’s bad to break somebody’s leg, but sometimes doctors have to do that to get the leg to heal correctly. We are in need of deflation to bring prices closer to the real mean and restore the ability of lower economic quintiles to actually live.
The layperson’s meaning is prices going down. The above post is absolutely the correct view for everyone in the bottom 80% of income or wealth. Individual items deflate in price all the time and wanting prices to fall is a perfectly rational personal view.
If the price of one thing falls, that’s isolated. If the price level - the price of all things - falls, then that’s deflation and it’s historically been one of the most destructive economic events that can happen to an economy and to ordinary people and their jobs and livelihoods.
Wanting the price level to fall is far from rational, and the fact that people might think otherwise in spite of the historic precedents is exactly the sort of mass irrationality I am worried about.
You seem unsure here about the difference between inflation and prices. Inflation is the rate of change of prices.
Positive inflation means that prices are rising. Inflation is falling because prices are rising slower than they were a year ago. You seem to think that ‘falling inflation’ would lead to falling prices - it would not.
Falling prices would be a very bad thing. That’s something called deflation and tends to be associated with economic crashes like the 1930s. If prices were falling, people would put off spending money on anything except essentials because they’d be able to buy things cheaper tomorrow, which tends to lead to a self-reinforcing economic depression and mass unemployment.
Deflation is necessary to revert to the correct mean of prices if they were not skewed by subsidies and other regulatory manipulation of the market. Deflation may be “bad” in the same sense that it’s bad to break somebody’s leg, but sometimes doctors have to do that to get the leg to heal correctly. We are in need of deflation to bring prices closer to the real mean and restore the ability of lower economic quintiles to actually live.
The layperson’s meaning is prices going down. The above post is absolutely the correct view for everyone in the bottom 80% of income or wealth. Individual items deflate in price all the time and wanting prices to fall is a perfectly rational personal view.
If the price of one thing falls, that’s isolated. If the price level - the price of all things - falls, then that’s deflation and it’s historically been one of the most destructive economic events that can happen to an economy and to ordinary people and their jobs and livelihoods.
Wanting the price level to fall is far from rational, and the fact that people might think otherwise in spite of the historic precedents is exactly the sort of mass irrationality I am worried about.