The fact that we have a $10.5 trillion debt to pay back is disconcerting to many people. After the recession of 2008, many people were concerned that they would not have enough money to pay off the debt. Now, many people are still concerned, but their concerns are directed towards getting out from under their debt.
The point is that in the long term, it is possible that the debt can be paid off even if there is a deflationary effect. We are still in the midst of the Great Recession, which is also part of the deflationary effect. During the Great Depression, when people were worried about food shortages, the government sent money to the banks to pay off the debt.
This is all very good news. The whole point of deflation is that it can eventually decrease, but in the long term it can actually cause a positive change. When we were in the Great Depression, we had a recession because people felt the government had let the financial system collapse. If the money had been in circulation longer, people would have been able to pay off their debt, but they chose to not because it would have caused a recession.
If we had had a deflation period prior to the Great Depression, things would have been a lot different. People would have been able to pay off their debts, but they would have had less money. It would have been easier to borrow, but it would have been a lot more expensive to use money.
So we ended up in a deflation period which caused unemployment, which was bad for business, which caused the consumer to feel the economic pain, and which caused many people to lose their jobs. You might be wondering, “How can deflation cause unemployment?” Well, in this case, it’s because deflation has a negative impact on the economy. But deflation does have a positive impact on a small number of businesses.
The key point here is that deflation causes deflation. You can always look for examples of deflation in the past. But the key thing is that the economic situation is always more about the choices of people than it is about the actions of governments and banks. So while you can always look at a deflationary period in history, you shouldn’t be overly critical of those periods for the reasons listed above.
Inflation is a more negative thing. A period of deflation can actually be quite good for some businesses. When you have inflationary policies from central banks it causes a lot of businesses to slow down or even cease to exist. This reduces competition, leads to higher prices, which hurts your customers, and creates more problems. The effects of this are seen in the world as a whole in the form of greater poverty, corruption, less investment and a lot more unemployment.
We can’t really argue with that. As we saw with the 2008 economic crisis, when the central banks started printing too much money and interest rates skyrocketed, more people lost their jobs and businesses shut down. As we saw again in the 2000-2001 recession, when the banks began using this inflationary policy to inflate their bubble, it caused even more unemployment and a lot more foreclosures.
If you’re going to be in a recession, a recession is a severe financial shock, and if you think of them as a whole, you have to think about the history of the country in which you’re in. The US economy was never in a recession, it was nowhere near recession level. It was always an economic downturn.
Thats the point. When deflation is caused by the government, it may seem like a good thing, but when deflation is caused by the private sector, it causes more harm. It slows the economy down, and causes more unemployment. Why? Because the private sector is not only competing with the banks for the same money, but is also competing with other businesses for the same customers. Because consumers are still spending, other businesses are still trying to get customers to spend.
