Consumers wouldn’t, because they still need things like food and shelter, which they already spend most of their income on. But corporations and wealthy individuals absolutely would. In a deflationary environment, the value of money sitting still in a big savings account goes up while the value of goods and assets goes down. They shift their wealth into whatever vehicle they feel will provide reliable growth.
This was one of the problems we had during the Great Depression. Nobody was investing in new or expanding businesses, so no new jobs were being created.
That’s assuming deflation was the cause of that instead of simply being a symptom of the collapse of the financial system. Also, in a deflationary environment, money sitting in a savings account wouldn’t necessarily collect interest, in fact the interest rate for a savings account could even be negative. Either way, a healthy investment environment would provide much greater returns than a 2% increase in value of money sitting in an account. Consumers continuing to buy things means there are clear business opportunities.
Consumers wouldn’t, because they still need things like food and shelter, which they already spend most of their income on. But corporations and wealthy individuals absolutely would. In a deflationary environment, the value of money sitting still in a big savings account goes up while the value of goods and assets goes down. They shift their wealth into whatever vehicle they feel will provide reliable growth.
This was one of the problems we had during the Great Depression. Nobody was investing in new or expanding businesses, so no new jobs were being created.
That’s assuming deflation was the cause of that instead of simply being a symptom of the collapse of the financial system. Also, in a deflationary environment, money sitting in a savings account wouldn’t necessarily collect interest, in fact the interest rate for a savings account could even be negative. Either way, a healthy investment environment would provide much greater returns than a 2% increase in value of money sitting in an account. Consumers continuing to buy things means there are clear business opportunities.