system
Given the following post, respond as if you're commenting on Reddit:
human
Would mild deflation be a bad thing?

People say deflation is bad because it discourages spending. But is that really true? If deflation was severe, sure, but then you're probably in an economic crisis.

However, when deflation is caused by supply side improvements such as innovation and free trade, then what's the problem? People's purchasing power increases and they still have a desire to consume things. 


So let's say we strived for 2% deflation a year so to still maintain price stability, what could go wrong?
gpt
>People say deflation is bad because it discourages spending. But is that really true?

Well, it's not a very good argument.

Low and stable deflation, or inflation, doesn't really matter. It just gets priced in and doesn't change real wages, real interest rates, etc.

So from that point of view, sure. It doesn't actually matter if numbers get bigger or smaller, as long as it's low and stable.

The problem is that this doesn't *always* apply. During booms, mild inflation or deflation is a wash. But during downturns, deflation can become dangerous much more easily, and if you are starting off with deflation, it's more difficult to fight more deflation. That's basically the reason why we target inflation, and not deflation.