FEAR & GREED | Business News Ask Fear & Greed: Why is low inflation so bad?
Mar 4, 2025
A listener raises an intriguing question about the risks of low inflation versus high inflation. The hosts explore how low inflation can lead to consumer behavior changes, potentially stalling economic growth. They delve into the dangers of deflation, highlighting its negative impact on spending habits. Alongside these economic discussions, a nostalgic segment adds a personal touch, intertwining insights with relatable experiences. This blend of economic theory and storytelling keeps the conversation engaging and thought-provoking.
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Risks of Low Inflation
- Low inflation discourages spending because consumers anticipate lower prices.
- This delayed spending slows economic growth and can lead to job losses.
Car Purchase Example
- Michael Thompson uses the example of delaying a car purchase due to falling prices.
- This illustrates how deflation can incentivize consumers to postpone spending.
Impact on Spending Categories
- Deflation affects discretionary spending (cars, holidays) more than essential spending (groceries).
- People are less likely to delay necessary purchases regardless of price fluctuations.