President Donald Trump pushed fantasy accomplishments at his State of the Union Address this week, including a claim that prices were falling in America. They aren’t.
But more to the point, wrote Jonelle Marte for Bloomberg, he shouldn’t want them to be either.
“It’s a difficult message for a US president to deliver to a public that is feeling squeezed financially and just wants things to go back to costing what they used to: But a little bit of inflation is actually good for the economy, whereas a drop in prices overall is typically a dangerous sign,” wrote Marte.
Deflation, or a sustained drop in prices, is generally a worse situation for the economy than inflation. For one thing, it incentivizes consumers to spend less, as their money grows in value while it is being saved. It also increases the value of mortgages, loans, and debt, putting people in a deeper hole even as they make their payments on time.
But even more broadly, deflation tends to be a sign of a recession, accompanied by stagnation or decline in economic productivity, job losses, and rising unemployment. At the worst moments of the 2008 financial crisis, the U.S. saw deflation and interest rates briefly dipped into the negative. Generally speaking, falling prices happen when people aren’t spending enough money and businesses are desperate to entice people in.
That’s a good thing for your immediate purchasing power — but only if you’re one of the few who keeps their job, and isn’t stuck in a bad job you’re now terrified to lose.
This is not the only economic issue on which Trump has been warned by experts he’s ignoring the downsides; the Wall Street Journal editorial board recently took the president to task for enthusiastically embracing the idea of a weaker dollar on foreign exchanges.
The post Trump warned to watch what he wishes for as his key fantasy could lead to disaster appeared first on Raw Story.
