What is worse: Stagflation or deflation that leads to equally high unemployment

[ddeemo]

Originally Posted by Wolverine607

Well generally for the whole economy high unemployment is bad for anyone.

Some say the joys of deflation is so bad because it leads to contraction of economy and job losses. And that may be true.

But without a doubt, extremely high inflation (Stagflation) that causes high unemployment is far far far worse than deflation for sure.

I mean with deflation we just have high unemployment, but people with money gain purchasing power and at least do not lose it.

With high inflation and high unemployment, we have an employment problem just as bad and people with save cash the value of it is eroding very fast. SO far far worse than deflation.

Now you could make the argument high inflation with low unemployment and lots of jobs is not as bad as deflation and high unemployment/job losses. As people at least still have jobs.

But I do not see how anyone could believe severe inflation which high job losses is better than severe deflation with high job losses.

I know right now we have high inflation and do not have high unemployment at least not yet, but this question is a hypothetical scenario.

Stagflation - is more about persistence of inflation, it does not mean "extremely high".

The classic definition of Stagflation is stagnant economic growth and persistent inflation - from investopedia.com

Stagflation is characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e., inflation). Stagflation can be alternatively defined as a period of inflation combined with a decline in the gross domestic product (GDP).

Deflation is about price declines - very rare - often accompanied by massive unemployment and other impacts - from investopedia.com

Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. During deflation, the purchasing power of currency rises over time.

In general deflation is far worse. 10% job loss is not massive job loss expected under deflation.

[EDS_]

Originally Posted by Wolverine607

I highly doubt that. The largest consumer debt is a mortgage for mist consumers. And home prices have set record after record highs partly because of ZIRP. SO debt levels have actually increased.

Unless you do not count mortgage debt as consumer debt because you can sel the home and get back what you owe or more usually??

But it is debt to me almost the same.

Consumer debt covers things that are consumed and do not appreciate normally. Mortgage debt is a separate item.