Wheels within wheels.

[David Horn]

(08-31-2018, 03:57 AM)Kinser79 Wrote: In a generally deflationary cycle of say 1-2% deflation the poor's purchasing power would increase yearly.  Those increases would allow them to save at first small amounts of money, and later larger amounts of money.  Not only has this happened before, but it happened in particular with my grandparents who were GI generation.  Their parents were core Losts whose parents were slaves.  The savings that their parents had managed to get them some starting capital with which they eventually bought assets which lead to more savings and more capital.

That being said, it seems to me that the main thing that determines if one ends up being rich or being poor is determined by a systemic approach to finances and economic activity.  In general, the poor and middle-classes have over time tended to purchase with their purchasing power liabilities.  The rich on the other hand tend to purchase assets.

In case you missed the history of deflation, it is triggered by reduced purchasing power that is then echoed in reduced prices (or nothing gets sold).  Of course, that's also a major problem.  If prices are dropping, then no one spends a dime they can save, which stops the economy in its tracks.  Deflationary depressions are by far the worst.  Even the often cited hyper-inflation in Weimar Germany did limited damage, but the deflation policy followed from 1930-33 (when Hitler took control) finished-off pre-Nazi Germany.

In short, deflation is vastly worse than inflation, and much harder to reverse once it starts.