notes
It is January 10th 1930, Black Thursday was mere months ago. 20% annual inflation over the next two years would be preferable to 5% annual deflation over the same time period.
black thursday - stock market crash
pro (deflation worse)
- deflation harmful for loans, debts bc of wages staying fixed versus burden increases
- inflation rising → nominal wages rise
- unwilling/unable to get loans → zero interest rate bound
- cycle of falling wages, unemployment, etc
- rewarded for doing nothing → economy stays still
con (inflation worse)
- farms and food supply would stay constant
- food prices are ‘inelastic’ → stays affordable as deflation occurs?
- deflation would level playing field, increase value of wages
- are poor people the only community that matters when considering the impacts of deflation? would either inflation/deflation be much worse for richer people and thus cause instability in the economy as businesses change strategies to account for the changes?
- i feel the argument about the misery index was surprising since it felt like it really weakened the inflation side’s points, since it was a opaque, undefined stat that was brought up purely because of how it weights inflation v. deflation
It is 1997 in Japan. 15% annual inflation over the next 3 years is preferable to 4% annual deflation over the next 3 years.
deflation worse
- gdp was only growing by 1%, securities and banks failed
- hyperinflation → higher nominal wages, being able to pay off debts that stay fixed
- deflation → unemployment, private sector debt would worsen
- cultural? → spending won’t ramp up again because of non-consumerism?
inflation worse
- collapse of the economic system?
- → already lowering trust of the japanese economic system
- phillips curve was flat → rigid pricing, sticky wages
responses
It is January 10th 1930, Black Thursday was mere months ago. 20% annual inflation over the next two years would be preferable to 5% annual deflation over the same time period.
- Are poor people the only community that matters when considering the impacts of deflation? Would either inflation/deflation be much worse for richer people and thus cause instability in the economy as businesses change strategies to account for the changes?
- I feel the argument about the misery index was surprising since it felt like it really weakened the inflation side’s points, since it was a opaque, undefined stat that was brought up purely because of how it weights inflation v. deflation.
You start from a vague and ill-defined point in time in the United States somewhere within the last 30 years. Predictable steady 7% annual inflation over the following 5 years would be preferable to stochastic highly variable fluctuating prices across the economy that average out to exactly a 3% rise each year.
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There was some discussion about sticky wages but I’d be interested in taking it further—do the highly variable fluctuating prices mean that the strong variation in the valuation of jobs in an already job-saturated market (based on inflation and phillips curve) will affect how businesses handle employment?
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I really liked the point of the predictable 7% annual inflation causing distrust towards the feds, with the implication that they’re aware that the inflation will stay constant but aren’t doing anything about it.
It is 1997 in Japan. 15% annual inflation over the next 3 years is preferable to 4% annual deflation over the next 3 years.
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On the phillips curve being flat (an argument made by the ‘inflation is worse’ side), wouldn’t that mean inflation and deflation are being handled the same in terms of unemployment, meaning that deflation is still going to be worse in that regard?
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Similar to the previous debate, I liked the points made around trust. In particular, deflation increasing the already lowering trust of the Japanese economic system due to it already being in deflation. Also, though I don’t think it was super ‘persuasive,’ considering cultural aspects in terms of consumerism after a deflation was another really interesting point.