one of the really big problems with deflation in a system like the one we currently have is that there is no way to set a “negative” interest rate, at least trivially. So if something spicy happens, and you spiral down to a really aggressive negative interest rate, everything explodes instantly.
This is actually why we target a 2-3% interest rate, and in the times of financial struggle (globally) use it to create new money in order to stimulate an economy, which in turn raises inflation significantly, but beats another literal depression.
The primary difference between the great depression is that covid was significantly worse, and that modern monetary policy is incredibly resilient compared to back then.
you could theoretically have a system with deflation, but then the problem is that you have very little money moving through the market, and arguably you will move away from a currency based market, to a goods based market instead, which is quite literally a bad thing.
one of the really big problems with deflation in a system like the one we currently have is that there is no way to set a “negative” interest rate, at least trivially. So if something spicy happens, and you spiral down to a really aggressive negative interest rate, everything explodes instantly.
This is actually why we target a 2-3% interest rate, and in the times of financial struggle (globally) use it to create new money in order to stimulate an economy, which in turn raises inflation significantly, but beats another literal depression.
The primary difference between the great depression is that covid was significantly worse, and that modern monetary policy is incredibly resilient compared to back then.
you could theoretically have a system with deflation, but then the problem is that you have very little money moving through the market, and arguably you will move away from a currency based market, to a goods based market instead, which is quite literally a bad thing.