Inflation is painful. It robs everyone, from the postman to Wall Street’s most powerful investment bankers, stealing their spending power without a vote—and it does so with a penchant for society’s most vulnerable. But deflation might be even worse. While falling prices can sound appealing, deflationary environments are terrible for growth. As former Goldman Sachs CEO Lloyd Blankfein explained in a Bloomberg interview in October 2021, it all comes down to consumers’ expectations for the future:
“When you have deflationary expectations, you say, ‘You know something? I’ll wait for tomorrow.’ Tomorrow, you wake up and you say, ‘I’ll wait another day because it’s getting cheaper and easier,’ et cetera…Then you really are in the economic doldrums.”
