US annual inflation declines to 7.1% in November vs. 7.3% expected

Groceries, sure, but then as a consumer you are still impacted because suppliers are less likely to provide the goods you want.

Deflation is really bad. One of the consequences of the gold standard was the big swings (inflationary after a big gold strike, like California' Yukon, or Victoria; deflationary when the gold supply could not keep up with economic activity) that you can easily see in the second half of the 19th century.

So, I'm with you. I've had it explained to me many times, and it still doesn't make much sense to me. I'm going to buy cars / houses / investments / goods / services when I need them and can afford them-- not based on speculation about their future prices (well, except for investments, if I have some magic insight).

From a business perspective, I've been involved in many purchasing decisions and never once was "it might be cheaper or more expensive in the future" a part of the decision making process.

It really feels like "deflation is bad" is an economic theory that should be tested. Yes. We've had deflationary shocks, and those were bad, but that was because a) it was a shock rather than a gradual slope and b) it usually followed a period of marked excess. I'm not convinced that deflation itself was the enemy as much as the other ancillary issues. It's hard to disentangle that, though.

This will obviously not mean skipping eating, but will manifest more as fewer "special" meals like steak or lobster or whatever.

> a fridge, a new roof

If you are a homeowner, you know that most equipment failures are a decision to either repair or replace. In a deflationary environment, owners will bias toward patching things as long as they can. (The opposite is true in an inflationary environment.)

> a new car

You may be extremely fortunate. Most people would try to make it through (say) a year of public transit/rideshare/etc. if they could save (say) 8% on a car. Average price of a new car in 2022 is ~$48k; saving 8% on that is something like half a month's pay at the average American salary, which is larger than the annual raises most people get at even good jobs, even in good times. Don't underestimate the sacrifice people will make to earn another few hundred $/mo.

I strongly recommend you review the definition of deflation.

> Higher inflation means our debt is 'worth' less

Inflation is a huge benefit to the debtor class, which includes most homeowners. The rhetorical tactic of focusing on high gas prices brilliantly misdirects people from asking the relevant question of why their wages aren't increasing at the same rate as inflation. Once wages catch up to this recent bout of inflation (they eventually will), most consumers will be much better off than if the inflation had never happened.

I don't understand the magical thinking often demonstrated in these threads. Just because it sounds plausible, that doesn't necessarily mean its true.

There’s a reason n=1 samples aren't usually the basis for general descriptions of behavioral trends.

Also think about how tricky itd be to manage a business. Your supply is getting less expensive in $ terms monthly, but also the value of your goods in the market is going down each month. Weird situation.

(There's also an error in assigning unit purchases like washing machines as a proxy for consumer behavior: consumers select within a purchasing category more frequently that then opt out of categories. In other words: deflation and inflation can determine how much you're willing to spend on a washing machine, rather than breaking your commitment to already purchase one.)

Consider yourself extremely fortunate to be able to manage your purchases this way, but also consider that this is not the norm.

Edit: Meaning that, presumably, you like being paid. So you probably don't want to incentivize being paid less, or not at all. Deflation does both of those things.

A deflationary economy would be a drastic change from the system we operate under now but I don't think it would be all bad. Maybe in a deflationary economy people would feel like they could actually save money. Or it could put an end to the 40 hour work week. I doubt demand of necessities would change much in a deflationary environment: food, medicine, shelter, etc.

This is an absurd claim. Nobody seriously considering mattress vs CD (or bonds in a low rate environment like we had 2008-2020) is swayed by a return of less than a couple percent. It is a security vs liquidity vs trust calculation, not a return based one.

Furthermore, as the other commenter points out, rates are correlated but not necessarily in lock step with inflation. The rate on your savings account is probably still sub 1% (although bonds have gone up).

They’re only linked due to rehypothecation of money supply which is a problem in an of itself. But it gets a little complex to explain.

Edit: my brain skipped over the ‘cash’ part and assumed ‘risk free’ interest would still be collected.

I am privileged in many ways, and I agree that such a class exists and is growing. I’m in my twenties and almost everyone I know is a flat-broke renter.

I did not mean to imply that everyone can easily save and invest their way to wealth regardless of their economic situation - this is ludicrous and anyone suggesting otherwise is out of touch.

My clarified points are as follows:

1) Prudent savers, who by definition have extra money at the end of the month, are not better off due to deflation because the prudent thing to do with spare money is not to leave all of it in cash. Most non-cash non-fixed-income assets do terribly under deflationary conditions.

2) Homeowners, who are still a majority of American adults, definitely do not benefit from deflation. Homes are one of the assets that do terribly in deflation.

3) Many people, including me, believe that deflation drives up unemployment by chilling consumption. This is another argument why deflation is not good for savers - many of them lose the ability to save when their income evaporates.

4) Speculation is not necessarily to make any money left over keep up inflation in the long run. In the short run, outside of Series I bonds, good luck.

Part of our disagreement might be in the definition of the term “saver”. To me, this is someone with both the inclination and means to have a surplus each month. Others might include someone with the inclination who might not have the means. Among that group, some folks might be better off if their income is flat but their cost of living decreases as that allows a budget surplus.