How come we experience so much more inflation than deflation? in other words, why does our buying power decrease far more often than it increases?
How come we experience so much more inflation than deflation? in other words, why does our buying power decrease far more often than it increases?
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Actually, inflation by itself is a natural phenomenon,
associated to the growth of the population. Deflationary trends are actually symptoms of something far worse happening.In order for inflation not to exist, growth and access to natural resources should match the growth of populations.
In a Utopian society, a la Engels, the growth and access to those natural resources would be controlled to match the growth and access needs of the population, thus helping humanity not to experience inflation. But of course, that also denies humanity, and humanity’s ambitious nature.
In reality, the growth and access to those resources is controlled for many reasons, which in many cases, have nothing to do with ambition. For example the geographical access to certain commodities can be used to barter for resources or commodities inaccessible in that community.
And of course, there’s ambition and the discovery that owning a resource gives us the power to demand more for it, and not only have a better live, but have access to anything we want.
When there’s a disruption in one resource, as far as accessibility to it, it has a chain reaction that affects everything else.
Take the war in Ukraine and it’s repercussions across the world. The two resources that have been disputed right now is wheat and oil. Two of the major suppliers of indispensable commodities in the world are at war and their commodities are inaccessible or hard to obtain. Just the shortage of wheat has significant implications in the food that is processed for consumption around the world, because it’s not only used to feed humans, but other sources of meat for humans.
But what happens in a deflationary trend? One would think we just produced more of something and we have to sell it at a lower price, until we get back to an equilibrium of supply and demand. But it’s not that simple. Causes of deflation could be:
A) Lower numbers of population. While access to the natural resource is there.
B) Overproduction of a certain good.
The first one, indicates that either people are dying, leaving or not reproducing. And the demand is lowering constantly.
Now, think about why would people leave a community. A quick example: crime. Two examples: People leaving their towns in rural Central America for the US, or in Africa for Europe because their home towns are overrun by warlords, gangs and drug cartels. Likewise, communities in the US that are run by drugs and crime is rampant. You have a choice to flee or die.
The second one speaks about the over production of something. By default, companies don’t try to over produce, because the costs associated to storage and maintaining an inventory could eat up on their earnings. But there are times when overproduction happens because of a bubble. The easiest example for this, is the Tulip crises of the 1400s. Tulips became a sought after commodity that the prices started going up. Suddenly Tulios went from a nice flower to an investment. A bubble was created. People decided that it was a better investment to buy and sell tulips, than plant wheat, or sell meat, which drove the prices of food up; some people even mortgaged their home or land to invest the money in Tulips. For a time, that created wealth and people spent it in luxury. And then, Tulips were over produced and came out of style. Demand disappeared almost instantly. And then people didn’t have money to pay their debts, to buy food, live in a safe place. Famine and plagues started…and prices went down because there was no demand for anything.
So…that’s why you don’t want to see a lot of either, inflation or deflation, but it’s also why you see more inflation than deflation.
But of course, that also denies humanity, and humanity’s ambitious nature.
Man, I hope you're wrong about that, because Earth isn't growing any bigger. We did live in rough balance with things for about a million years, so I have hope.
Earth isn’t growing any bigger, but we have surpassed “limits” described by scientists without the collapse they predicted.
The actual capacity of Earth isn’t a fixed value.
Which limits are you thinking of? We're past the carrying capacity on certain fronts, but that was never a "will collapse" thing as much as a "we're going into debt" thing, and I think they were first calculated after we had passed them.
There's some ways in which we can stretch the Earth, but there's some that are set in stone. Energy budget comes to mind; we only get so much sunlight, and even if we start doing fusion to sidestep the sun we only have so much ability to radiate waste heat. Energy use on Earth will have to plateau within the next few centuries.
Here’s one:
"Population will inevitably and completely outstrip whatever small increases in food supplies we make," Ehrlich said in an often-quoted 1970 Mademoiselle interview. “The death rate will increase until at least 100-200 million people per year will be starving to death during the next ten years.”
World population in 1970 was 3.7 billion, and is 8.0 billion now. Ehrlich predicted that the carrying capacity of the planet had been met, and yet the population has more than doubled without the mass starvation his model predicted.
Yeah, they also thought birth rate would stay steady. It's dropped like a rock instead.
It is true that agriculture got better in that time. It probably will again. There's no hard limit being suggested here, though.