Can you provide an example of deflation destroying an economy in history? There are many more examples of inflation destroying economies.

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gwbas1c a day ago | parent | next [-]

The problems with using physical gold as currency are very well known. When population would increase, or when someone would hoard it, it would cause deflation. Likewise, when a new deposit of gold was found, it would cause inflation.

This is, in part, why there were expeditions to find gold.

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Roark66 a day ago | parent | prev | next [-]

Wasn't the great crisis in first half of 20th century caused by deflation?

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FeepingCreature a day ago | parent | prev | next [-]

Japan in living memory, I believe? I'm not a history buff. Google should have many examples.

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applfanboysbgon a day ago | parent [-]

The Japanese economy is not, in any sense, destroyed. It doesn't get the infinite exponential growth unhinged economists want, but life on the ground is stable, wealth inequality is low, cost of living is low, average quality of life is very high. It is the perfect counterexample to the doctrine of chasing line go up.

	▲	a day ago \| parent [-]
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a day ago | parent | prev | next [-]

[deleted]

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tekla a day ago | parent | prev [-]

Are you kidding me? Have you heard of a tiny event called the Great Depression?

The Japanese Lost Decade?

Greece Debt Crisis?

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jcbrand a day ago | parent | next [-]

Those are credit bubbles bursting, not the result of hard money.

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tekla a day ago | parent | next [-]

This is a almost entirely oversimplified take on the Great Depression to the point of meaninglessness

For a decade before Black Thursday,there had been many things that were signs that the economy was having trouble even if the "Roaring Twenties" made it seem like everything was fine.

IMO the largest issue was that American farm sector was teetering on the edge because of the dramatic drop in crop prices. This deflation screwed over farmers who mechanized with lots of debt, which because of said deflation, became impossible to pay off.

The fed also implemented rate hikes to curb speculation right before 1929 which froze up credit contributing to deflation

The problem of the Great Depression was NOT the stock market crash, it arguably wasn't even the real start, just the most "spectacular" one. The problem was that with the entire economy deflating, it caused a massive downward spiral that the Fed did not really have the tools to fix, because of Gold Standard and lack of legal authorization.

This was why the Govt went to extreme lengths to try and figure out how to raise prices, which is why you get programs to pay farmers to NOT grow food, and mass killings of pigs and cows and other farm animals, even as the farmers who raised those lifestock went hungry.

So no, speculation was not the problem, it just sparked the key issue of the fact that the economy was deflation uncontrolled, but was just hidden.

	▲	opo a day ago \| parent [-]
		This is a complex topic and I think you have done a good job of summarizing the main issues. To add a little context: >...that the Fed did not really have the tools to fix, because of Gold Standard and lack of legal authorization. This was just bad policy by the Fed. The Fed had the legal authority to be the lender of last resort and could have prevented the bank failures. Many explanations have been given over the years as to why the Fed didn't provide liquidity. Because the Fed failed to supply emergency liquidity, the U.S. money supply plummeted by nearly 30% over the next couple of years, which essentially turned what likely would have been a recession into the Great Depression. This is not to say the gold standard was not a problem. During the 1930's, leaving the gold standard was one of the few good moves done to help the economy by the federal government.

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FeepingCreature a day ago | parent | prev [-]

Yes, this often happens in pairs: the overcorrection after excessive credit results in a deflationary money market, destroying any chance at recovery.

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oblio a day ago | parent | prev [-]

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