/biz/ - Business & Finance

>>2805773
Yeah it's really basic economics which is why it's so sad that half of /biz/ doesn't understand it.

>>2805880
Like I said this isn't just some mathematical theory. It has been demonstrated throughout history hundreds of times. Let me give you some examples:

In the Roman republic after the annexation of Gaul into Rome there was a HUGE influx of slave labor. This means that the production cost of products became lower and thus the supply raised and the prices for the consumers dropped. This lead to roman citizens without slave labor were pushed out of the market as well.

so higher supply of goods+lower demand of goods (due to more romans without income)=lower prices for goods and services=Deflation=Romans sensing the crisis and realizing their money is worth more in the near future started spending less=less demand on the market=More Deflation and more romans out of jobs.

Eventually the people of rome got so fed up with the crisis that Caesar took over and this was the birth of the Roman Empire. Born due to the economic collapse caused by deflation.

Another example more current is the Japanese Deflation crisis.

Japan has a big aging population and high automation in their society. What happened was that a lot of aging people started to spend less money on consumer goods due to their pensions being relatively lower than their wages were. This is combination with more automation in the consumer goods sector= higher supply+lower demand=Lower prices=Deflation=People started spending fewer money because they realized their money would be worth more in the future=Even lower demand=Companies started losing money and have to fire people=Even less consumption due to people losing work and people sensing a crisis spending even fewer money.

I can name you even more examples if you want to but these should suffice. Both deflation and very high inflation will DESTROY an economy.