Key Points
- As shoppers await price cuts, retailers like Home Depot say their prices have stabilized and some national consumer brands have paused price increases or announced more modest ones.
- Yet some industry watchers predict deflation for food at home later this year.
- Falling prices could bring new challenges for retailers, such as pressure to drive more volume or look for ways to cover fixed costs, such as higher employee wages.
I really want to know where people got the idea that people would stop spending because their money is supposedly worth 2% more after a year. The only examples I see given are things like economic downturns (i.e. credit freezes and layoffs), where there is deflation because people are spending less for reasons other than deflation. To give an example of deflation not being harmful, just look at technology. Technology gets better and cheaper all the time, but it’s not like nobody is buying technology, quite the opposite in fact.
I’ve read that it’s a debt problem more than anything else. The world runs on credit, and inflation decreases the debt burden. When dollar value goes down thanks to the inflation, the value of the debt also goes down so it becomes easier to pay off (at least for those who do get inflation raises…). So essentially the rich get richer thanks to inflation.
That’s factored into the interest rate of loans. Inflation only decreases the debt burden when inflation increases higher than the average rate AND the one who needs to pay is actually getting more money. What’s the difference between a loan with a 6% interest rate when there’s 2% inflation and a loan with a 2% interest rate when there’s 2% deflation?