Key Points
- As shoppers await price cuts, retailers like Home Depot say their prices have stabilized and some national consumer brands have paused price increases or announced more modest ones.
- Yet some industry watchers predict deflation for food at home later this year.
- Falling prices could bring new challenges for retailers, such as pressure to drive more volume or look for ways to cover fixed costs, such as higher employee wages.
The cause of the great depression was overextended credit and stock market gambling. Deflation was present because people didn’t have as much money (or credit) to spend, but it was merely a symptom of an economic downturn, not the cause.
If the Great Depression happened during COVID19 (2020), then we’d still be in the middle of it today (2024) and wouldn’t really be out of it until 2028.
The Great Depression started in 1929. It was exacerbated by terrible economic policies and continued to get worse until 8 years better, when finally new policies kicked in and brought us out of it.
The Deflationary spiral was a big part of the extended depression and the multi-year effects. This deflationary spiral was stopped by making gold illegal, allowing the USA to float its currency more arbitrarily (ie: forcibly cause inflationary effects to counter-act the deflationary spiral).
Between 1930 and 1933, 30% of money was wiped out. That’s a deflationary spiral by any measure. As money became more expensive, everyone in debt (ie: credit cards today) would be worse.
If you owed $100 in 1930, you effectively owed $130 in 1933, because all money got more valuable ($100 in 1933 was like having $130 in 1930). Imagine if that happened today: that everyone’s student loan debts, mortgages, and other debts just suddenly became more valuable nominally. It’d be horrific and extend the problem.
We only got out of the great depression because of world war 2. Any policy pales in comparison. It was a huge government spending program that employed many. It also meant a lot of working age men died, shrinking the labor pool, thus putting upward pressure on wages. The generous social programs helped, as did the fact that US infrastructure wasn’t destroyed like it was in Europe.