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How come we experience so much more inflation than deflation? in other words, why does our buying power decrease far more often than it increases?
(lemmy.dbzer0.com)
this post was submitted on 22 Jul 2023
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Everyone seems to be missing the most dangerous part of deflation: If prices fall year over year, collateralize credit becomes incredibly unstable. If you borrow a million dollars from the bank to build a house and then in five years that house is worth half a million...well you would be stupid not to walk away for your loan and leave the bank with a half million dollar hole in its balance sheet. If the whole market does this consistently year after year then banking becomes impossible and the whole system collapses. Weve had this happen before, such as during the Great Depression and very briefly during other market crashes like in 2008. If a central bank has to choose between inflation and deflation, they will choose inflation every time.
So you're saying that deflation hurts the banks? Oh no! Not the banks!
Fuck regular people, right? A home is obviously an investment first and shelter second. Why would anyone need a home to live in, if they can just rent it out for obscene amounts of money, because banks have to have infinite profits?
There's a difference between sitting on a house for a decade to sell it at 10x the price and the simple fact that the builder of a house needs to make a profit over the cost of building it