Deflation, explained
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- čas přidán 18. 05. 2015
- Deflation: also known as falling prices. Falling prices may sound like a good thing - stuff gets cheaper. But fall too far, and they can cause a lot of pain, as this short video explains. #MarketplaceAPM #Deflation #EconomicExplainers
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Anyone watching this during corona virus panic ?
Instead of cash people hoard toilet paper ffs!
@TheFinalBoss correct. This is scary!
A lot of people having those drinks right now...not me!! gotta stay healthy sober and ready for what's next.
So I'm hording money, waiting for the stock market crash... I'm part of the problem 😔
Good....I thought I was going down the “tin foil hat” road. I’m glad I’m not the only one seeing this.
Deflation is only a bad thing if it's caused by a dangerously large bubble or banking panic. We should implement the Friedman rule and the Chicago plan.
Soooo.. Should we be panicking now?
@@milesp3624 or elect Ron Paul in 2012. . .
chicago boys oh no, how to spot you are an american
Deflation mixed with corruption means the rich would buy everything up leading to more inequality if things do ever re-balance.
Surely this would only be an issue if the money supply stayed constant...
If you reduce the money supply, and you reduce the prices then everybody gets wealthier than they would have been.
ROTFL the most hilarious deconstruction of MMT that I've ever read. Well done!
What a moron you are. Thinking that there is such an easy way to make people wealthy instantly. We would have achieved world peace by now if that was the case.
@@amobilway1032 but we can inflate and cause people to become less wealthy? logic.
I disagree, if there is anything to learn from people is they that any time they have money they will spend it. If deflation increases your purchasing power, rest assured people wont sit waiting for a higher gain. Honestly, the real reason deflation is “bad” is because banks can’t lend money that easily
That was the quickest and most effective way of explaining deflation i have come across. Thank you !
I love this! Simple, straight forward, and a little funny. Thank you! :)
The most helpful learning source ever! Thank you so much, mate Paddy Hirsch!
Veronika Iliopololou Thanks Veronika!
This video literally just presents a bunch of shitty metaphors while teaching you nothing. Check out Ray Dalio's "How the Economic Engine Works" for something with enough substance to at least make sense.
i know bitcoin is deflationary and the value mathematically talking will always keep going up,
but my question is will it maybe go to much up that nobody wants to produce anymore products?
@@sam_180x That's just stupid. You can't eat or live in a Bitcoin.
@@dowskivisionmagicaloracle8593 if a system with 2% anual inflation works, a system with 2% deflation should also work, go watch the video 10 MILLION DOLLAR BITCOIN END GAME.
How would you explain the consistent deflation for almost a century during the Industrial Revolution? How would you explain the falling prices in consumer electronics; those prices have been falling for 20 years. I know my iphone will be cheaper next year, but I still bought it this year. This whole idea that deflation is bad is the other side of the coin, that says inflation is good, which is a con perpetuated by central bankers who only really have one tool in their tool box, which is to print more money.
dropping prices =/= deflation...
Good explanation thanks to the simple, but yet powerful visual example.
Thanks!
Yes I second that, thank you :)
I am Canadian. Qualified for CERB. Saved 90% of it. Went back to work, never have I saved before until now. I am a textbook case of an individual who would cause deflation. The virus made me more interested in economics.
It's hard to believe Deflation can occur with all this printing dollars and giving them away. I am more concerned that people will refuse to accept the dollar as payment if this trend keeps up. US Money supply was at an all time high of $4 Trillion a year ago and now it's $18+ Trillion and Joe says he wants another $2 Trillion "Infrastructure" spending.
US infrastructure is dogshit that literally wastes US's income potential in the trillions. Connected and well functioning societies are efficient and productive societies... infrastructure is extremely important.
@@calin6327 Infrastructure "spending" is always a top priority for the electeds, then they spend on shit we don't want
thank you, Sensei!!
This is a great explanation!
Very well explained.
Nice analogy. thank you!
I'm investing into Bitcoin and an argument someone made against Bitcoin is deflation and now I'm here doing research on deflation. Trying to find an argument against Bitcoin being a good investment but honestly deflation doesn't sound as bad as inflation. Inflation keeps me from reaching high places in life financially but deflation doesn't necessarily do that to me if I work in a business that is constantly selling and I do as a farmer.
Yes I understand that if someone can't afford your crops than it does affect the farmer but no matter what they are always going to have to buy that food some way somehow. And I just feel like jobs such as farming and food really keep deflation from becoming a bigger issue than it could be.
I think that deflation is very good in long term!
Thanks for explaining that. My problem only problem is that, ive never witnessed that type of deflation. All I see is prices increase and increase. Maybe Petroleum is the exception.
Super. Thank you
cant believe i understood it within 2 mins. kuddos sir!
I like how every video ends with needing a drink (cheers)
The Market has been pretty bad. Everybody is Practically Crying. It keeps dipping. That's what you get when you feel you can navigate the process in your own. Big thanks to Mrs eva heather . I'm not bothered with how bad the market is because my assests are insured due to her advice and I still receive my profits >
she's definitely the best. She keeps surprising me with results. We are planning on surprising her too. You must have heard about that.
You invest with Mrs Heather too? wow that woman has been a blessing to me and my family.
I think she trades for everybody I know. Met her twice at a conference in Germany, after her lecture I had to personally beg her to be my Finacial Advicer. I celebrate her strong feet.
I also make huge profits in stock market by trading with her weekly, her consistency is crazy
@@lopezwilliams5599 You can reach her on Tele
This is making perfect sense
deflation : money is created by banks as debt with an interest attached. the interest does not exist to pay on the initial principle created, the system survives only with inflation more new money being created to continue the interest payments. when their is not enough new money being created the entire money supply contracts .... banks who issue loans to create money go bankrupt as their loans go un-paid. what money existing becomes much more valuable, prices fall because the supply of goods is too much for the money in the economy. a supply and demand equation, where they meet is price. during deflation more and more money gets destroyed as more and more debts go un-paid, lending freezes leading to lower prices as the market is in desperate search of the bottom, wages fall, unemployment rises, asset prices fall, those assets were pledged as collateral for loans in past and for current new money, this all feeds the avalanche. 2008 was an example. people used homes as money creating machines, when they went down in price banks all froze as they were all bankrupt, it took the central bank to print TRILLIONS and governments to run massive defcits more TRILLIONS to replenish the destroyed money/banking system.
Best explanation I've seen
Thanks Zak.
Your videos are really good and informative
Paddy Mate you're a GOAT. Great explanation
very good explanation, thank you
What happens after that freeze? Like what's the smartest play with your money during that time?
💛Easy to understand thank you🙂
Well explained!
Here's an easier explanation for people in the comments section. *2008 crisis = Deflationary, 1929 Great Depression = Deflationary, 1987 crash = Deflationary, 2000 dot com bubble burst = Deflationary. 1979 gasoline crisis = Inflationary, Weimar Republic = Inflationary, Venezuela crisis = Inflationary, Zimbabwe crisis = Inflationary.* Too much deflation or inflation causes serious problems on the economy, but inflation is easier to fight against versus deflation. 2% inflation is good and makes sense, otherwise few people would buy stocks, real estate or invest in anything. People don't always understand the dynamics of supply and demand.
Lecturer: "She wigs out."
I can dig it.
Every explanation I've ever seen about why deflation is so bad is presupposed on the premise that "people will stop buying things because they'll wait to see if prices go down", which has always sounded like bullocks.
Thanks mate ✨
may also raise the real value of debt?
Yes absolutely
so how would you describe our economy right now? is it deflation or inflation? i see signs of deflation everywhere with jobs only hiring part time and more and more people being counted out of the workforce but yet prices aren't dropping. food prices are going up. so is it possible to have both because that wouldn't make sense to me. can someone explain?
MrOodlesnNoodle 'JL' I would say INFLATION. Sure the price of some goods are falling (gas) or holding steady (food), but services are rising in price: cable bills, insurance premiums etc. And those are higher-ticket items. That's because companies are having to pay their workers more.
@@marketplaceAPM your reply was that "core inflation" was rising, right?
well done thank you
So isn't a slow deflation generally a good thing?
Great explonation, i didnt like the sound of marker when writting, it is pretty annoying for my ears!
lulzim fazlija get over it loser
Yes so cringy
Let me ask you a question. Do you think deflation will effect the price of silver and gold so that it too goes down in price or with people hoarding cash would they possibly convert their dollars into gold or silver and feel extra safe? I'm very interested to see your response so I hope you see my question. A thousand thanks.
gold is not complete inflation protected, they mine 1% to 3% of all the gold stock per year,
so in 72 years the stock from gold doubles,
yeah of course the price still goes up because new people buy gold,, but its not completly deflationary.
bitcoin is mathematically talking made for always goin up in price, because there only exist 21 million bitcoin
1)Can you prop up industries if you focus spending in a particular area for a period of time? Say a country with 22million people, how many people do I have to convince to focus spending in an area to prop up that area before we move to the next. 2) in which order of industrie gives the best opportunity for an economy to grow?
Thanks for the explanation. I have a question: one of the main arguments for Bitcoin is that it is a deflationary currency whose value continues to increase rather than decrease over time. For this reason, more and more people think it's a good idea to jump on the Bitcoin bandwagon. But isn't there a greater macroeconomic danger in doing so - or is there no danger at all, as long as there is a 'normal' fiat currency like the dollar available to 'normal' people, while super-rich Bitcoin czars indulge in the promised land of financial freedom?
Think of Bitcoin as the Bottlecap currency they have in the Fallout videogames. The concept of scarcity and the idea that it will have "value" as long as people are willing to trade for it. If everyone stopped paying attention to bitcoin and decide is no longer valued for trading, it will lose all its value. Like i said. As long as people view value in it, it will hold.
@@ricreusaurelius4163 Exactly like art, collectables, gold or even USD. They also will stop having value if people stopped caring for them. Except with USD people with guns would start showing up threatening to put you in jail if you didn't start using USD again.
Is there a real example of the negative effect of deflation?
great , thanks
Why is this seen as a negative thing? People dont use their capital to buy things, because they dont have any, they use credit.
At laaaaaaaaaaaaaaast now i got it ... now i have to dig further to know when does that happen and what is the relation between deflation and interest rates ?
Mohamed Afify this one took me a long time too. Almost seems strange I had such a hard time. But Americans in my generation have never really experienced wide spread deflation. It’s truly foreign. Aside from the cost of some goods going down because of efficiencies, we have only experienced inflation.
This idea is based on the assumption that folks won’t buy stuff under the ( again) assumption the prices will continue to fall. Two too many assumptions in that equation mr paddy
The only thing i can relate with deflation is AAA games developer selling half-price from pre-order after a month of low sales
Funny how he mentioned TV's and cars instead of more important things ... like food!
Exactly, it’s a fallacy!
Well, that's the consensus anyway. How anybody believed that is a mystery to me. How many people wait even a week to buy the latest iPhone or other techno gadget even though they know the price will fall in six months, a year? I understand how the theory originated though. It originated in a time before consumerism, when people "mended and made do". It was quite plausible to reason in the 1950s that if prices started to fall, people would defer their purchases. That world ended generations ago. Very few people alive today even remember it. Now in the age of rampant consumerism and instant gratification, only the most miserly would stop buying things they wanted, in the belief that the price would drop. Everyone else would seize the chance to get the latest and best.
Vincent Causey: just in case you are interested, everyone I know waits two years before buying the new iPhone which makes it an old iPhone, save a bunch
That squeeky pen is worse than 2020 ecconomy
Fala Koala I think we were the only ones to look at this video in the last couple months
But if prices go down on basic goods like milk, veggie’s or meat, how is that a bad thing? He is talking about televisions and cars, but how often are people buying cars or tv’s? My vehicles are from 2014 and 2016. My last televisión purchase was in 2019. I doubt these purchases were impactful enough to have helped to keep the economy going.
Anytime watching this during the biden price hike
does deflation not mean that less and less money can buy the same products at the same deflated prices? just like when currencies inflate, it just mean it will cost more money at inflated prices to buy something?
I wonder if people can have their current salary and but to buy the things which priced 20 years ago.
The baseline state of a competitive market without monopolies is deflationary. Human curiosity drives technological innovation, enhancing efficiency. This, combined with consumers constantly seeking "more for less" and entrepreneurs striving to stay competitive, results in deflationary pressures on prices across all sectors. Ultimately, prices should fall to the marginal cost of production. If this premise holds true, I am compelled to question the collective conviction that monetary inflation is a necessary component for a functioning economy. To be more direct, why do we endorse a system where a certain loss in purchasing power, akin to a hidden tax, is deemed essential and undemocratically imposed upon us? Could it be that we find ourselves entangled in a conflicting paradigm? One where the exponential growth of technology, promising efficiency and deflation, clashes with the perceived need for inflation to stave off economic downturns, especially in the face of seemingly unsustainable levels of debt.
this guy writes backwards like a pro
Control deflation help the working class
IMO, the assumption that average people would be hoarding money forever is an irrational fear of the establishment. Granted, it would certainly shake up the economy but it wouldn’t be all doom and gloom the way it’s being depicted here. Our values would change. For the better.
1) What about food? People would stop hoarding food supplies when there’s deflation.
2) People would get in less debt to begin with.
3) There’s more incentive to work sooner because your money’s worth will increase faster so you can retire earlier or start your own business sooner as well.
Extreme inflation hurts everyone, but I think an equal level of deflation would mostly hurt those in the non-essential sectors of the economy. An average deflation of 2% would actually be beneficial for a bigger part of a population and probably even better improve for general health in the long run.
deflation empower the individual, inflation empower the state
It's 2021 and I bet you guys that were all hoarding cash right now LOL
just here for the artistic magnificence
Next time could you please explain that prices are not falling, but money is getting more dear. Most people seem to have no concept of how the money supply works. I think that if we refereed to 'money rising or falling in value' due to the changes in the underlying economy, it might help
Most people will buy thing quicker if there is a big discount (cheaper price), not the other way around.
I love deflation.
what if instead of falling fast, it falls slowly without rising. all the things happen but, since company's know having too much stock is bad and wont sell, the company focuses on quality rather than quantity, and since less products are sold less often less money is brought to the businesses (laying off people), hopefully those unemployed create their own business creating competition focusing even more on quality and production so you have all these small businesses competing. and the people who hoard the money, that money is taken though tax and used for hospitals schools and roads, so it go's back into the economy. (i know nothing about economics but its just and idea.)
Good question. Can anyone answer? I was thinking the same thing.
So... How can policy makers and central banks correct deflation?
-by increasing money supply as it will increase the purchasing power
-low interest rates on savings will make it less lucrative for people to save and so they might tend to spend
-higher gov expenditure so that more jobs can be created and so people might have higher purchasing power
-reducing taxes will increase the disposable income so ppl will be able to spend more
A universal basic income would prevent people from getting scared and not buy anything. It doesn't solve the economy floating on consumption though.
🔥
But deflation steady and slow is far better than creating bubbles that burst.
Hello Canada time to get educated what is happening right now! :D
Cathie Wood predicts deflation now.
He should stress that a small deflation rate per year is actually quite beneficial. It is when you see deflation rates at 5-10% a year for prolonged periods that it can be a disaster if wages don't keep up.
I think you mean inflation. Wages decrease in a deflationary period.
so, deflation is good, thanks
Deflation Is good for people period. People create saving less spending in the economy. It is only bad for the rich wealthy people who own too much assets. Since wealthy individuals own too much assets they then want to increase spending. However it will not happen unless they take their money to the bank as savings. The bank then schemes along with the governments permission on loaning the monies. So people should not save at a local bank unless your money will be returned with a better return than the markets (Dow, S&P, Nasdaq... Bond market). When the aggregate family decides to spend money then, inflation arises eg Boomer college years or family formation period.
The pandemic now along with the government helped burst the deflation period quickly which resulted in larger monopolies and many small Main Street businesses closing, Deflation formed in large scale cities where pop. Density was high. Meanwhile market asset deflation has not formed yet. However it is slowly approaching it’s transition from hi tech to the new and better resources mining economy.
Most of the scenario makes sense except for the very first thing. If prices drop , people will wait for them to drop more. I don't ever think this way , for inflation I am not going to rush out an buy something "now" because I am worried the price will be higher tomorrow. If I want a TV I am not going to wait a year for the price to drop. Unless it is something big like a house I want to buy. Funny I notice that when the price of houses in my town went up a lot. People were in a rush to sell their house to get the money , equity they made. The only problem is they bought a bigger house which also had increased in price , so they screwed themselves. You should always sell your house after there is a price collapse to buy a bigger house , because the bigger house will have decreased more in price.
I think this guy has a nice theory on deflation but is that what really happens? I think it starts when the money supply dries up , like in the great depression. Banks were afraid to loan or they went out of business. That happened first , then people had no money to buy things, then the products dropped in price when the buyers disappeared. Then companies laid off employees due to slowdown, then the laid off people stopped buying things completely which caused more deflation.
Money needed to be injected and people had to use it to buy things. The government should have given out free money in the form of coupons that would expire. so $1000 coupon to spend on goods that expires in 3 months , so they won't save it. Or the value could just drop every month by 5% to encourage people to start spending.
This youtube video, I have heard this theory of deflation 50 years ago and I don't think it is correct.
If a universal basic income could be arranged then nobody would need to be afraid that they won't be able to live when unemployed
@@Galaxia53 It doesn't work. That is what they had in the Soviet Union and no one wanted to work. There has to be fear. The fear can be reduced somewhat with Unemployment benefits but a universal income would remove all fear and no one would want to work. We can see this happening currently . People have saved so much money from the stimulus checks and just saving money , that they don't want to work or demand a lot more money , which will drive up inflation. The lady renting my house in Florida is a manager at McDonalds and making $35,000 last year and more this year. She has to work 18 hours a day because she can't get employees. Three people quit on her last week.
Take this scenario, Universal basic income is instituted and then everyone quits their jobs. You would have empty shelves and have to stand in line 5 hours to buy anything. This is what my wife's mother did in Ukraine. She was supposed to work 8 hours but the boss did not care and she only worked 2 hours so she could go the the market and stand in line for 6 hours to buy a bag of potatoes. My wife was a litter girl in 1985 and remembers standing in line everyday to buy things.
@@jeffbguarino What part of FLORIDA? Ik here in Miami-Dade people were quitting weeks after getting hired over the past year and half.
@@musak.4068 Kissimmee on Highway 192 near Encantada Resort.
@@jeffbguarino The cost of living is low up there that may have played a role in them being comfortable with quitting
THIS IS NOW!
Slide analogy was absolutely pointless
Deflation coming May 2021!!
This should be recommended to everyone with sleepy joe about to be in office
Great info but that dam marker noise 😖
This is what happened during the great depression. The monetary supply shrunk leading to a deflationary spiral.
It didn't shrink, the FRS just stopped the reckless money printing started on 1924.
@@alanhoff89 It was a Credit crunch meaning they were not letting anyone borrow money. They were strangling the economy because in the current monetary system there needs to be constant money creation and more debt for it be kept afloat.
Agly noise
The dislikes on this video are because of the marker squeaking.
Watching this in 2024 with bidenomics n Trudeaunomics we need a good 3 quarter of deflation for prices to go back down to at least 2020 levels.. same goes for rents.. cut the dollar printing as well everyone tired asf of constant inflation in North America
Nobody hoards cash because things are getting cheaper. That’s a faulty assumption.
Deflation coming up soon
Wouldnt consumers buy more at the inicial low price? Instead of inventory pilling up i would think there would be no supply at all since everyone is buying.
Not really. At least not when they think it's a trend that will continue. Why buy a TV today at say $500 when next month you can get the same one for say, $375? Get yourself a new (cheaper) Xbox too while you're at it with the cash you've saved. In a deflation people want to wait for prices to get cheaper. In an inflation people buy as fast as possible before prices get higher.
@@googleminus1442 you don't know exactly when the price will go down so people will buy when they feel the need to buy it
@@hiphopheaven If the deflation is not meaningful or in this case consistent enough that people cannot be certain prices will drop in a reasonable amount of time then it is less of an issue. But of course, people don't only buy things they need.
Have you tried buying a GPU in the past 2 years or so? I for example have wanted buying one for more than a year now. Prices were high, but I know it will not last forever. I know it will drop. I already have a GPU, this was just an upgrade, so I wait. Prices dipped slightly several times in the past year. Still, I know it will drop more, and I do not need it immediately. So I keep waiting until early this year when I finally bought one when it has dropped to an attractive level for me. So did many others. Even though GPU prices are crashing back down these days, many are still waiting for it to drop even more.
This would obviously apply less to necessities like rice, cooking oil, etc, which is why in my example I used a TV. A TV is for entertainment. It is something people want, not something they need. If prices for a product or service has been going down for, say, the past 6 months, and there have been no relevant changes in government policy or other economic factors, then there is no reason to believe it will not drop again in the span of the next 6 months.
@@googleminus1442 Even for entertainment it's difficult to resist buying something you really want right now even if you know it will get a price drop at some point.I used to follow consoles sale regularly and people was still buying consoles even when the price was dropping in 2 weeks.
@@hiphopheaven Well now that we're getting into the realm of opinions and he says she says it becomes difficult. Different people have different capabilities in terms of delayed gratification. For one, in a real deflation, there are usually things that follow that will encourage people to save money. Sometimes wages stagnate, or real wages decrease when we compare it to inflation. But very rarely does nominal wage decrease. But let's say it does. Okay, your wages decrease. It's fine though, other prices decrease too, right? But wait, your mortgage doesn't go down. Bought a car with credit? That doesn't go down with prices of goods or wages. If you borrowed 10,000$ last year, and let's say prices of everything (including your labor, of course) somehow fell 50%, that 10,000$ debt is not going anywhere. It's not getting slashed down to 5,000$. In an inflation, that debt is equal to less and less work as time goes on. In a deflation, it equals more and more work. Because you're going to earn less and less, you have to start saving more and more. This causes demand to drop. Demand drops, revenues drop, and you know how the rest goes faster than we can spell "recession". Even if you spend that initial savings, this scenario will still occur if the deflation does not stop. In a deflation more and more income will in the wallets of those who lend others money compared to those who are borrowing or are indebted (who will be paying a bigger and bigger percentage of their paychecks as time goes on). Those who lend others money are less likely to spend compared to those who borrow money from others (after all, why borrow money that you're not going to spend?), and demand decreases anyways.
But what if this scenario is closer to reality? In the real world, there is such a thing as sticky prices, including the price of labor. And the price of labor is known to be sticky especially downwards in the nominal sense. Getting workers to accept decreasing wages is difficult. So when the prices of their product are falling but the workers do not accept their wages falling too what do companies do? They reduce costs in other ways. One of the biggest ones being slashing production cost. Lay off workers until you get to a manageable level in terms of of expenses. But of course in the larger picture, those workers laid off will still impact the company. Now they don't have a certain income every month. With companies laying people off left and right, who knows when they'll have another stable employment and fixed income? Weeks? Months? Years even? Better save that money, right? And that makes the spiral get even worse.
The marker is irksome
Your wedding ring is on the wrong hand.
jeez this marker....
Actually, there was no food prices deflation ... only some consumer electronics, but every time this happens, manufacturers stop selling the deflated product and replace it by the "modern" one. Thanks from Ukraine 2021! We, ukrainians, do know that inflation is much more distructuve, becouse it ruins your savings.
The daughter died from going down the slide too fast
Not so fast. The fact is about 65% of Americans live hand-to-mouth regardless of income or economic policy. Inflation or deflation these people will spend.
You have to consider that inflation over decades is responsible for pushing the amount of said Americans to 65% in the first place.
2021
Basically what he's saying is we can't have the average person ever saving money, they need to be working paycheck to paycheck to make ends meet and be forced to put on kneepads at the polls when an unexpected event occurs
What is good for an individual is not necessarily good for the economy of the many. What is good for him short term is not necessarily good for the long term. In a deflation he will suffer too.
@@googleminus1442 Get outta here with that collectivist talk commie
so.....inflation is really bad......and deflation, which would be the opposite....is also bad.....yeah....makes total sense 0-0
ugh the marker!!!
Ughhh...I know. I was grasping my couch cushion AF when he was using it
If more people can afford a product then how does that cause deflation witch is "bad". More people buy that product witch meens the company makes more money.
czcams.com/video/7iWXPx7wjlo/video.html
Inflation or deflation
You’re getting fired anyway 😬