How is the USA supposed to get out of a deflationary spiral?

[Accelerationist Poland-Lithuania]

It's pretty safe to say that the USA is either heading into or is already in a state of deflation.

Consumer prices dropped in March at the fastest pace in more than five years, early evidence that the coronavirus is launching the U.S. economy into a period of deflation—a potentially damaging and self-reinforcing cycle of declining prices.

The Labor Department said Friday that the consumer-price index fell 0.4% last month from the previous month, pushed lower by a sharp decline in energy prices. The CPI’s energy basket fell 5.8% from February as gasoline prices slid 10.5%.

The drop is slightly more dramatic than economists anticipated. Those surveyed by Bloomberg expected a 0.3% decline in total CPI from a month earlier.

Even excluding prices for both energy and food—the cost of groceries rose 0.3% as lockdowns continued and people stocked up—so-called core consumer prices fell 0.1% last month, the worst decline in more than a decade. Economists often exclude food and energy prices and look at the core numbers to smooth out bumps from those more volatile components, even though those items comprise sizable chunks of many Americans’ spending.

The fall in the core number was more surprising than the slide in total CPI, said Ian Lygen, head of U.S. rates strategy at BMO Capital Markets. Prices fell across a variety of categories, from apparel to new vehicles to airline fares.

The March CPI report shows that disinflationary forces are already taking hold. While deflation, or a prolonged fall in consumer prices, might sound good, it can result in a vicious downward spiral where businesses make less money and consumers save more and spend less.

The report “underscores that the fallout from the coronavirus has had a large disinflationary effect on prices due to the large demand shock, plunge in oil prices, and stronger dollar,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.

“The disinflationary impulse, along with the great disruption in economic and financial market activity, is a key reason why the Fed is unleashing vast new monetary policy stimulus,” she said.

While aggressive stimulus measures will eventually spur inflation, many economists say that isn’t going to happen soon.

Still, consumers continue to face rising prices in some key areas. In addition to food prices, where the impact of stay-home orders and restaurant closures came through in March as pasta and rice prices rose 1.8% from February, eggs increased by 2.8% and fruit cost 4.6% more, the price of health care continued to increase.

Prices for medical services increased 0.5% from February while hospital services rose 0.4%. Those increases came as rents rose 0.3%, consistent with the pace of inflation before the coronavirus pandemic. Those gains helped to slightly offset declines elsewhere last month.

“Overall, this is a troubling print for the Fed’s ambitions of rekindling inflation; however the mid-outbreak timing of the data suggests there will be more downside ahead,” Lyngen said.

This is obviously bad (why else would a decline in the price of consumer products be bad?) because falling prices lead to falling profits, which lead to defaults on debt and bankrupcies, which lead to layoffs, which finally leads to a decrease in demand as the economy slowly cannibalises itself to make up for diminishing returns.

You might say "this is fine, the USA can get out of this by throwing money into the economy and propping up Boeing so it can buy more of its own stock" by arguing that what FDR did during the great depression worked, but even under FDR the US economy's recovery was temporary and gave way to a very sharp slump after a few years of the New Deal. It was so bad that a lot of people at the time actually thought FDR was hurting the economy - Fortune's Roper poll found in May 1939 that 39% of Americans thought the administration had been delaying recovery by undermining business confidence, while 37% thought it had not. The US economy only really recovered during WW2, when they were given a reason to manufacture a bunch of shit and ship it across the Atlantic. Of course, there's also way, way more debt that's never going to be repaid than there was in 1929 and 1938, so it seems like if anything it should be harder to unfuck the coming economic situation.

What does the next decade even look like? What should policymakers even do about this?

[New haven america]

Finally, groceries will be affordable for once in the past 10 fucking years.

[Accelerationist Poland-Lithuania]

Finally, groceries will be affordable for once in the past 10 fucking years.

Until you stop having a source of income and the grocer can't pay its bills.
Unless you're a NEET or something, I guess that might be alright since you're already living hand-to-mouth on teat of a vaguely Keynesian welfare state. I'm personally a student on welfare so I just think it's funny this is happening mostly, plus it's not like any of this is worth keeping around. I hope society gets set on fire and that it isn't a controlled Bill Gates demolition that ends in an internet of things and compulsory sterilisation by a totalitarian world government. If we all start starving to death, the police refuse to leave their families and go risk their lives for people who don't even know their names and Abdi starts raiding Tesco's, I'll just laugh as the internet goes out and wait for some vibrant youth to blow my head off for a bag of rice. I'm too blackpilled for this shit. I hope they can't do a thing about this crisis and that it's not manufactured. I thought the West was going to be like Guayaquil by now back in January though, so probably wishful thinking.

[Vetalia]

Finally, groceries will be affordable for once in the past 10 fucking years.

Until you stop having a source of income and the grocer can't pay its bills.
Unless you're a NEET or something, I guess that might be alright since you're already living hand-to-mouth on teat of a vaguely Keynesian welfare state. I'm personally a student on welfare so I just think it's funny this is happening mostly, plus it's not like any of this is worth keeping around. I hope society gets set on fire and that it isn't a controlled Bill Gates demolition that ends in an internet of things and compulsory sterilisation by a totalitarian world government. If we all start starving to death, the police refuse to leave their families and go risk their lives for people who don't even know their names and Abdi starts raiding Tesco's, I'll just laugh as the internet goes out and wait for some vibrant youth to blow my head off for a bag of rice. I'm too blackpilled for this shit. I hope they can't do a thing about this crisis and that it's not manufactured. I thought the West was going to be like Guayaquil by now back in January though, so probably wishful thinking.

What on Earth are you going on about?

[Tinhampton]

"How is the USA supposed to get out of a deflationary spiral?" By KILLING IT WITH KINDNESS! It worked for Selena Gomez - it can work for Your Country too!

[Deacarsia]

Economic Depressions: Their Cause and Cure

[Cambrian Albany]

Finally, groceries will be affordable for once in the past 10 fucking years.

Until you stop having a source of income and the grocer can't pay its bills.
Unless you're a NEET or something, I guess that might be alright since you're already living hand-to-mouth on teat of a vaguely Keynesian welfare state. I'm personally a student on welfare so I just think it's funny this is happening mostly, plus it's not like any of this is worth keeping around. I hope society gets set on fire and that it isn't a controlled Bill Gates demolition that ends in an internet of things and compulsory sterilisation by a totalitarian world government. If we all start starving to death, the police refuse to leave their families and go risk their lives for people who don't even know their names and Abdi starts raiding Tesco's, I'll just laugh as the internet goes out and wait for some vibrant youth to blow my head off for a bag of rice. I'm too blackpilled for this shit. I hope they can't do a thing about this crisis and that it's not manufactured. I thought the West was going to be like Guayaquil by now back in January though, so probably wishful thinking.

Based as fuck mate.

[Nattily Dressed Anarchists on Bicycles]

Finally, groceries will be affordable for once in the past 10 fucking years.

Will no one think of the profiteers?

[Greed and Death]

Finally, groceries will be affordable for once in the past 10 fucking years.

Will no one think of the profiteers?

Exactly there is a man who bought up 10,000 rolls of TP. why cant he sell those at a profit ?

[Stellar Colonies]

Mailing free money to Americans

[Ayytaly]

Will no one think of the profiteers?

Exactly there is a man who bought up 10,000 rolls of TP. why cant he sell those at a profit ?

Because people realized the bathtub is paper-free and more convenient.

To wash your bum, not to shit on.

[Vetalia]

Exactly there is a man who bought up 10,000 rolls of TP. why cant he sell those at a profit ?

He can try but the market died down a couple weeks ago. It will be fun seeing him carting them and the gallons of hand sanitizer and isopropyl alcohol to the stores to attempt to get a refund only to find all sales are final. Seeing these jackasses get burned big time puts a smile on my face.

On the bright side, he won't need to buy toilet paper for at least a few generations.

[Novus America]

Ultimately by raising the birth rate/and or increasing inflation. A deflationary spiral is generally caused by a increasingly adverse dependency ratio.

[Albrenia]

Will no one think of the profiteers?

Exactly there is a man who bought up 10,000 rolls of TP. why cant he sell those at a profit ?

I'd prefer we all point at laugh at him for being a douche.

[Nouveau Quebecois]

Finally, groceries will be affordable for once in the past 10 fucking years.

Groceries were un-affordable?

[Vetalia]

Exactly there is a man who bought up 10,000 rolls of TP. why cant he sell those at a profit ?

I'd prefer we all point at laugh at him for being a douche.

I think the "all sales are final" is the most appropriate justice of all. I can certainly buy some of his rolls at a fraction of market to take them off his hands,

With 10,000 rolls you would have a multi-generation cache under the most generous estimates...you'd finally use it up the grim darkness of the late 22nd century.

[Nattily Dressed Anarchists on Bicycles]

Exactly there is a man who bought up 10,000 rolls of TP. why cant he sell those at a profit ?

I assume he would have, had he offered his rolls at a reasonable price, rather than at the absurd exploitative mark-up he was obviously seeking.

[Nattily Dressed Anarchists on Bicycles]

Mailing free money to Americans

I understand it's technically an advance on next year's tax return (EDIT: more specifically, it's an advance tax credit), so it's actually more like future-government taking less of my future-income so future-me can send a check back through time. This is not exactly the same thing as "free money."

Except present-me haven't received a stimulus check yet, and present-IRS is being rather mum about it, so I'm starting to get a little worried about future-me.

[Tyvertsia]

Until you stop having a source of income and the grocer can't pay its bills.
Unless you're a NEET or something, I guess that might be alright since you're already living hand-to-mouth on teat of a vaguely Keynesian welfare state. I'm personally a student on welfare so I just think it's funny this is happening mostly, plus it's not like any of this is worth keeping around. I hope society gets set on fire and that it isn't a controlled Bill Gates demolition that ends in an internet of things and compulsory sterilisation by a totalitarian world government. If we all start starving to death, the police refuse to leave their families and go risk their lives for people who don't even know their names and Abdi starts raiding Tesco's, I'll just laugh as the internet goes out and wait for some vibrant youth to blow my head off for a bag of rice. I'm too blackpilled for this shit. I hope they can't do a thing about this crisis and that it's not manufactured. I thought the West was going to be like Guayaquil by now back in January though, so probably wishful thinking.

What on Earth are you going on about?

I do believe that OP is what some might call 'stark-raving-mad.' Don't do reddit, kids.

The United States is an economic powerhouse. It'll either get bailed out by every nation and the Roman See, or Californians will have to freshen up on their Japanese. Most likely situation though is that the economy has an implosion and we'll have to deal with a far smaller economy with like nine corporations that properly secured themselves for this kind of thing to ensure the continued survival of this already terrible system. Then again, revolutionary sympathy is sweeping the nation and I for one enjoy the sounds of guillotines, so who knows. Regardless, we'll come out the other side in one way or another.

[Saint Nicholas and the Hussars]

I would let it all burn down. It will either result in a totalitarian dystopia or an anarchist dystopia and I think that would be cool and funy. Or maybe a totalitarian dystopia inside an anarchist dystopia.

Of course not AAA APE GOES VROM

[Saiwania]

If deflation is truly happening, what the Federal Reserve usually does is print more money and flood the market with cash or to make interest rates favorable, to do bailouts and other things. From what I've read, the US isn't have a deflation problem, it is about break even with the money supply expansion going on.

[Torisakia]

They won't. I personally don't believe the US will have another economically prosperous period in my lifetime. All because they decided to ignore the world's warning and label it a hoax. Gotta take responsibility for your actions.

[Saiwania]

They won't. I personally don't believe the US will have another economically prosperous period in my lifetime. All because they decided to ignore the world's warning and label it a hoax. Gotta take responsibility for your actions.

The rest of the world isn't doing any better than the US is on climate change. Blame China and India for the coal they keep burning.

[Neu Leonstein]

There's a more interesting angle to the OP's question, one that stretches back a few decades and in which Covid is just a small piece. A case in point. But I fear this is no longer the place to discuss such things.

So for now, let me just say that it would hep if the US government wasn't the most incompetent of the large bureaucracies on the planet I've yet witnessed. This need not be a lasting shock, and plenty of countries in Europe, or Aus & NZ, have demonstrated how to put together packages that address a temporary grinding halt in activity in a way that allows as seamless a reboot as possible.

In the US? All goes in the too hard basket. Just let people go unemployed, right? They probably deserve it anyway, right? The sheer lack of creativity ability to learn from example and implement something new is genuinely shocking.

But hey, let's just buy HY ETFs. That'll fix it.

[Chan Island]

Personally the idea of each coin in my pocket actually gaining more value over time seems like a giant relief and a welcome change to the usual miserable standard.

Like yeah, I get that it might be bad for the economy and stuff but the concept of being able to afford a few nice things for once seems super cool....