In deflation, where does the money go?

I'll give you an example, but it's not necessarily appropriate.

Suppose that there is only one bag of rice in the world, which corresponds to 100 yuan for a certain person. Although Person A had 100 yuan to buy the bag of rice, Person A temporarily deposited the 100 yuan in the bank; Because B also wanted to buy rice, he borrowed money from the bank, and the bank lent 100 yuan to B, but B did not buy rice for the time being, and deposited 100 yuan in the bank, and the bank lent 100 yuan to C because C wanted to buy rice. One day the three of them want to buy rice, because there are many people who need rice, and the credit is inflated, which will inevitably lead to the price of rice, and if everyone insists on buying rice, it must reflect inflation (100 yuan can only buy one-third of the bag of rice).

At this time, the social wealth expressed in money is 300 yuan, that is, A and B each have 100 yuan in bank deposits, and C has 100 yuan in cash. Although in reality, the wealth of society reflected in physical goods is only a bag of rice.

Later, because the price of rice was **, B and C couldn't afford to buy rice and decided not to buy rice, and the bank asked to pay back, so they returned the bank's money, and then the social wealth reflected by the whole society in currency became 100 yuan (or a bag of rice). There is only 100 yuan of currency in circulation in the world, which is deflation compared to the previous period.

Deflation is mainly caused by the following reasons: 1. Contractionary fiscal policy and monetary policy. The adoption of contractionary monetary or fiscal policies by the authorities of a country, such as reducing currency issuance and fiscal expenditure, will excessively compress investment and control social demand, which will lead to a slow growth of the total demand of the whole society, or even a decline, resulting in a decline in prices.

The result of the decline in social demand is the weakening of the market, which in turn affects the effective supply of society.

2. Currency demand factors. During inflationary periods, monetary authorities may adopt excessively drastic tightening policies in order to rapidly reduce the inflation rate, including raising interest rates, raising the reserve requirement ratio, and selling short-term bonds in the open market. When inflation is suppressed but the outlook for economic growth is bleak, investors are less motivated to increase investment because prices are trending downward, because there is a positive return on keeping cash without investing, and the cost of investor debt, i.e., the level of real interest rates, is high.

At this time, consumers' consumption is also affected, because the decline in prices is conducive to delaying consumption and not conducive to increasing consumption. Investors and demanders also need certain conditions to change their decisions, and it will certainly take some time to wait for these conditions to mature, which shows that deflation will also become a process, rather than a phenomenon that stops instantly.

3. Imbalance in the economic structure. Consumer demand is changing, which requires manufacturers to keep up with demand and quickly adjust the production structure. However, for a number of reasons, it is not possible for producers to quickly adjust the structure of production.

This will result in some products being in short supply and others being in excess of demand. However, in the case of oversupply in the overall market, the shortage of products is not fast, and the degree of oversupply of products is very large. Manufacturers of oversupplied products will reduce production or lay off workers.

And the result of layoffs is to reduce the income of the whole society, reduce the purchasing power, and **will go further**.

4. The impact of the international market. For countries with a great degree of openness, they will be greatly affected by the bad international economic situation. This is reflected in the decline in exports and the decrease in foreign capital inflows.

A decline in exports leads to a decline in export products**, and a decline in export products** also drives a decline in domestic comparable products**. The decline in foreign capital inflows is not good for economic growth, and the slowdown in economic growth will naturally lead to further price declines. In countries that do not open up to the outside world to the outside world, the state of the international market is not good, which will also make the economy worse when deflation is already underway.

Further information: Deflation: When the currency circulating in the market decreases, the people's monetary income decreases, and the purchasing power decreases, which affects the price of goods to **, resulting in deflation.

Prolonged monetary tightening will dampen investment and production, leading to higher unemployment and a recession. The understanding of its concept is still controversial. However, economists generally believe that when the consumer index (CPI) falls for three consecutive months, it means that deflation has occurred.

Deflation is the persistence of overcapacity or insufficient demand that leads to prices, wages, interest rates, food, energy, etc.

First of all, we need to understand, what is money? Money is the equivalent symbol of material consumer goods in human society, and it is an intermediary material that facilitates the exchange of various material materials in human society. Human beings do not want to consume money, but to consume the various applied material materials that money represents.

Because people have produced a certain amount of material goods, they issue money --- the corresponding value symbol, and the total amount of money issued depends on the total amount of material materials, and the value of money reflects the value of the material materials it represents, not the money itself. To take the simplest example, "In an isolated society, where only material materials --- 10 catties of grain, then the society issues 10 yuan of currency." The result should be 10 catties of grain = 10 yuan of currency, and the corresponding 1 catty of grain = 1 yuan of currency.

And if the grain output remains unchanged, "this society issues 100 yuan of currency, and the result is 10 catties of grain = 100 yuan of currency, and the corresponding 1 catty of grain = 10 yuan of currency" Conversely, "the grain output increases to 100 catties, and the amount of currency remains unchanged, the result will be 100 catties of grain = 10 yuan of currency, and the corresponding 10 catties of grain = 1 yuan of currency" It can be seen from this that if the grain output remains unchanged and only the amount of currency issued is increased, the direct result is the so-called "inflation" phenomenon. The direct result of an increase in grain production without the issuance of more money is the so-called "deflation" phenomenon. It should be pointed out that if both problems are too prominent, they may lead to a contraction of material production.

From the above examples, it can be seen that the basis of the amount of money issued by the society is only the actual amount of material materials held by the society, and the so-called money, whether it is metal or paper, can only be issued around the actual amount of material materials, and the same proportion is issued, and the result of too much or too little issuance is inflation or deflation.

It's simple, and it's best to look at this if you want to get to know it in depth.

Why deflation, not hyperinflation?

Insufficient aggregate demand deflation, such as insufficient demand for investment, insufficient demand for consumption, or oversupply due to insufficient demand for exports.

Oversupply deflation, such as a sharp increase in the number of products caused by technological progress in productivity or industrial duplication, coupled with the lag between the market adjustment mechanism and the adjustment of the industrial structure, leads to a relative oversupply in a certain period of time.

Inflation refers to the ** of **, which leads to a decrease in the purchasing power of a people. Inflation is a normal economic development, as long as the annual ratio remains low, and when the proportion rises above a predetermined level, it is considered an inflation crisis.

The causes of inflation are multifaceted and depend on a number of factors. For example, printing excess money to cope with an economic crisis. As a result, ** eventually rises at an extremely high rate to maintain a surplus with the currency. This is called demand pull, **forced**.

Another common cause of inflation is the rise in the cost of production, which leads to an increase in the final product. For example, if the price of raw materials increases, this will lead to an increase in production costs, which in turn will lead to the company to maintain stable profits. Rising labor costs can also lead to inflation.

As workers demand increased wages, businesses often choose to have customers pay for them.

Not necessarily, most of the inflation is still inflation after inflation.

It can be said that inflation is certain and deflation is short-lived.

Ever since there was money, or since money became the general equivalent of class society, there has been inflation. Because inflation is a very effective means of exploitation.

Why deflation, not hyperinflation?

Deflation refers to the decrease in the amount of money in circulation, which refers to the economic phenomenon in which the overall price level continues to be the same.

Indeed, in the short term, deflation can reduce people's daily living expenses, which is beneficial to everyone.

But in the long run, deflation doesn't look so much to be happy about.

Good deflation is a decline in the general price level caused by an increase in aggregate supply due to an increase in labor productivity, and does not cause a "debt-deflation", and a decline in the price level does not lead to a recession.

When commodities last, companies reduce investment and production, resulting in wage cuts, no additional employees, or even layoffs.

When people's income decreases, or they are more pessimistic about future employment, they will reduce the desire for consumption, which will further lead to a decrease in demand and a failure to increase the quality of goods, forming a vicious circle.

To sum up, it is not a good thing for the economy, for society, or for us personally.

This is also why after the economic data came out in March, everyone began to worry about whether deflation was coming.

Bad deflation is caused by a decline in the price level caused by insufficient aggregate demand, and there is a vicious circle of "debt-delineation", which eventually leads to the self-reinforcing effect of a recession.

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Problem description: I am a liberal arts student who is reviewing for graduate school entrance examinations, and I encountered a problem of Marxist political economy that gave me a headache when I was reviewing politics. I already know that deflation causes paper money to rise in value, causing prices**. So why is this causing idle and wasted available resources, shrinking the economy, and increasing unemployment?

Can anyone tell me why in plain language? It would be nice to give an example, thank you.

Analysis: Deflation is generally caused by too much saving and not enough spending.

The total amount of money in the market is certain, and if everyone saves money and does not use it for consumption, then no one will buy what the factory produces, then the factory will go out of business, and of course the business will increase, and the resources will be idle, which will further bring about economic contraction.

China's situation in the past few years is a good example, the banks continue to cut interest rates, and the state continues to demand domestic demand. When bank interest rates fall, there are fewer people who save money and more people who consume naturally.