Optimal Finance Daily - Financial Independence and Money Advice 3239: Stocks - Part XIV: Deflation, The Ugly Escort of Depressions by JL Collins on Investing Advice
Aug 7, 2025
Explore the troubling relationship between deflation and economic depression. Falling prices may seem appealing, but they can lead to reduced spending and increased debt burdens. Understand the historical lessons of deflation's impact on markets and financial stability. Uncover the dual nature of deflation, where technological advances can bring benefits, yet economic downturns create significant risks. The discussion emphasizes caution when investing in a deflationary landscape.
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Deflation Defined Clearly
- Deflation is falling prices and rising money value.
- J.L. Collins says effects depend on whether it's from productivity or collapse.
Good Deflation From Productivity
- Technology-driven price declines are 'good deflation' because productivity raises living standards.
- Companies still profit as customers get more value for less money.
How The Deflationary Spiral Works
- During downturns, falling prices can trigger unemployment and shrinking demand.
- That cycle can accelerate into a hard-to-break depression.