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.
Not an economist at all. I can’t say anything about refusing to raise wages, I don’t know for sure that wages increasing to match inflation is bad for anyone except the capitalist class.
Inflation being more desirable than deflation is simple enough though. If prices are constantly, slowly, going up, it means that your purchasing power with an amount of money is always highest right now as opposed to in the future. This encourages spending - why wait to buy this thing in going to buy anyway, if it’ll be 3% more expensive next year? The one thing we absolutely don’t want is people just hoarding money, sitting on it because prices will go DOWN tomorrow. This leads to a stagnant economy, where there’s no money moving, and that’s bad for everyone.
And yet we have a whole class of people who hoard the most money.
I’ve heard this argument in economics videos, but if you think critically, you can’t wait to buy necessities no matter what way the dollar is moving. And even in an inflationary environment things that you can wait for will go down in price over time. They’ll age, newer versions will come out, a used market starts up for it, etc. So waiting for prices to come down doesn’t seem to be related to inflation at all.
And to give a more concrete example, think of the speed of inflation (assuming 2%/year). Well if we had a year of deflation at 2%, why would I wait an entire year for my $1000 product to be $980. The savings is a pittance.
Most of economics assumes perfectly rational actors capable of making these delayed purchases. It’s a bit reductive for sure, and hard to say how much the real world maps to the theory, but the logic works assuming those caveats.