China has another massive headache now: It can’t stem deflation

News@lemmy.world – 96 points – 12 months ago

China has another massive headache now: It can’t stem deflation | CNN Business

While many central banks around the world are still trying to cool inflation, China is grappling with falling prices.

The Consumer Price Index (CPI) dropped 0.5% in November on an annual basis, the biggest fall since the depths of the pandemic three years ago, according to data released by China’s National Bureau of Statistics on Saturday.

The drop marked an acceleration in the rate of deflation from October, when the CPI fell 0.2% from a year earlier, and prompted calls for urgent action from Beijing to boost demand and prevent a downward spiral of prices.

The data come days after Chinese policymakers vowed to strengthen fiscal and monetary support to boost the world’s second biggest economy, which is struggling with a real-estate crisis, high youth unemployment and subdued consumer confidence.

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Could I have some of that deflation

Deflation tends to trigger massive layoffs since revenue drops and investment becomes a worse option than saving.

Everyone always hopes that economic downturns will affect everyone but them specifically, but it really doesn't work that way.

Meanwhile we have inflation and layoffs.

Unemployment is essentially the same as it was before the pandemic, and is actually a bit lower than it was in the beginning of 2018.

Inflation is of course a problem. The point is that deflation is a much bigger problem. It's not as big an issue if you have plenty of savings to fall back on, which is to say, if you don't have savings to fall back on, you're fucked.

Unemployment is a shit metric when you can be starving, homeless, and employed. To those people, inflation is a life threatening squeeze.

Which countries do you think don't have homeless people, just out of curiosity? In the west, homelessness has almost nothing to do with actual economic factors.

You're the one who brought up layoffs, mate.

Why did you bring up a metric that you yourself are calling shit?

I just got here. But boy do I feel welcome to this conversation.

Different person

It's is quite shocking how much people on the internet decry financial illiteracy, and the turn around and demonstrate financial illiteracy.

I concur!

Ah yes, 0.5% deflation will have people clamoring to save their money instead of investing. Following your logic, prices should just never ever drop.

Buy crappy Made in China stuff. I personally buy higher quality because it lasts longer. It's far more expensive but lasts a lifetime. For example, you can buy living room furniture for $3000 and it lasts five years, or spend $8000 and it lasts 40 years.

Fact of the matter is that most people can't afford an $8000 furniture set. They may end up paying more for furniture in the long run than someone who can afford that set, but that's just the unfortunate way of things. This well summed up in one of Terry Pratchett's books:

The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. ... A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

So they will spend $12,000 in the end on shit, replacing it again and again.

Yes, in the end they spend more, but in the present, that’s what their circumstances can afford them.

Not everyone has the luxury to spend thousands on furniture at one time like you do apparently.

That is why they can't get ahead. You don't buy garbage. You save up and buy something that will last, but no, they only buy cheap garbage.

sigh

While I agree with your strategy, I also have enough awareness that this strategy doesn’t work for everyone.

If someone needs a bed to sleep, but they only have enough for a cheap bed, they buy the cheap bed and hope that when it wears out they can buy a better, higher quality one. They don’t forgo a bed and have worse health, they get what they can to get by.

Go tell the single mother of four that she bought a garbage table so her kids have a place to eat and she should’ve bought the quality table that costs two months of her rent, because it lasts longer.