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Comment by berkle4455 | Hacker News Reader

In other words: The massive inflation experienced across 2021 and 2022 is here to stay and it's still getting worse, just a wee bit slower.

Edit: Downvotes? Pointing out the big picture is too inconvenient a truth? We shouldn't be celebrating 3%, we should be demanding why it's not -3%.

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We do not want deflation, particularly in an economy where the average household debt has increased significantly. -3% means that the real value of all this debt that has been accrued over the past few years is increasing at higher rate - not only are you paying interest, but every dollar paid is worth more and more as deflation occurs. If you're hoping for a recession for whatever reason, I guess you could demand deflation, but for the rest of us, we just want inflation to slow down.

The goal is to keep inflation at a low enough rate that wages keep up.

> The goal is to keep inflation at a low enough rate that wages keep up.

https://fred.stlouisfed.org/series/LES1252881600Q

But they haven't have they? Median earnings are flat with Q4-2019 levels. Averages are higher because those of us fortunate enough to work in tech or healthcare are experiencing boom times, but for huge swaths of the country, things are looking very bleak. Take-home pay is the same, but the price of groceries and rent has continued to climb without abatement.

Sure - it's a multi-part issue. Deflation is just as bad when wages are flat, though, or even worse. The real value of all this debt Americans have accrued would still be increasing while wages are flat. Deflation also means that businesses are less likely to increase wages - all their debt is in the same boat, and they can argue that by keeping pay the same in a deflationary environment that people are getting de facto pay raises.

Obviously wages being flat isn't good when there is inflation, either - if they don't keep up you end up needing more debt because you can't afford to pay for everything out of your regular wages.

We're barely scratching the surface here, but modern economies have a lot of different cogs that really only turn properly in an inflationary environment. It just needs to be a lot less inflationary than it has been.

Thank you, I appreciate your insightful responses.

> We shouldn't be celebrating 3%, we should be demanding why it's not -3%.

Deflation is bad, actually. (Inflation slower than wage growth would be nice, though.)

> we should be demanding why it's not -3%

The answer is readily available. https://en.wikipedia.org/wiki/Deflation

and deflation is a good thing when you've had a massive run-up.

Economists don't seem to agree.

There is just about nothing worse than deflation in a modern economy. It causes lending and discretionary spending to completely seize up which practically guarantees a recession.

We don't really know.

Computers have been deflationary since their inception (you can get a better computer for the same money if you wait a year) but people will always value the present more then the future, that's why we've been buying computers regardless. The same principle could apply in theory to other asset classes, you want a house now even though you could get a better one in the future because you value comfort today rather then tomorrow. Spending isn't driven by inflation, it's driven by knowing we have limited time to live.

Duh, nobody would want deflation.

There are only keynesians here.

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