Hi, Shrewd!        Login  
Shrewd'm.com 
A merry & shrewd investing community
Best Of BRK.ABest OfAll BoardsThe Shrewd’m WeeklyLearn to InvestHow to Become Shrewd
Search
Shrewd'm.com Merry shrewd investors
Search
Best Of BRK.ABest OfAll BoardsThe Shrewd’m WeeklyLearn to InvestHow to Become Shrewd


The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
Answer this questionContinue to Shrewd'mThis note won't appear again
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
Unthreaded | Threaded | Whole Thread (20) |
Author: Umm ✹🐝  😊 😞
Number: of 22351 
Subject: Re: OT Fed/Macro/Rates
Date: 06/28/24 5:11 AM
Post New | Post Reply | Report Post | Recommend It!
No. of Recommendations: 12
"I think it's more about asymmetrical risk. Deflation is more dangerous than inflation."

This is exactly right. Excess inflation is destabilizing and hard on an economy, but deflation (even mild) can be very hazardous and really hard to eliminate.

The reason deflation is so hard to eliminate is that it trains people (or businesses) to delay purchases for as long as possible. If you are considering buying a new truck, if your delay the purchase a year, you can get the truck cheaper. It becomes a death spiral. Consumers delay purchases, so businesses cut back on production and lay people off, this causes consumers to buy even less (they need to save because they might lose their jobs). It feeds on itself.

Also, imagine what regular deflation means for an economy?

It means that every year, your boss calls you into the office and gives you a small pay DECREASE. Wages go down. Even though the relative spending power of your lower wages might stay the same (i.e. your lower wages buy the same number of Big Macs because the costs of Big Macs drop as well). That is not good for moral for workers to get pay cuts every year.

It also makes businesses less likely to hire because any hiring mistakes are magnified by deflation. In an inflationary environment, mistakes made can be grown out of. In a deflationary environment, mistakes are more costly.

Furthermore deflation hurts almost everyone. It is not good for investments, it is not good for the government, it is not good for workers.

The only people who really do well in a persistently disinflationary environment are those who put their money under that mattress or in coffee cans. Encouraging people to buy cash under the matress is not good for an economy.

Post New | Post Reply | Report Post | Recommend It!
Print the post
Members reply directly to Umm here — and replies get answered. Reading is free; so is joining the conversation. Join Shrewd'm »
This community has written 21,861 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 58 recs · 2023
Summary of 2Q 2026 · 55 recs · 2026
3Q Summary · 53 recs · 2024
Unthreaded | Threaded | Whole Thread (20) |


Announcements
Berkshire Hathaway FAQ
Contact Shrewd'm
Contact the developer of these message boards.

Best Of BRK.A | Best Of | Favourites & Replies | All Boards | Followed Shrewds | Open Questions | Moving a community