(Deflation is often more frightening than inflation)

Interest rate hikes are often accompanied by economic inflation, while rate cuts usually signal the arrival of economic deflation. An overheated economy needs to be suppressed through rate hikes, whereas an overcooling economy, which is a recession, requires rate cuts to stimulate growth.

Have you noticed a strange phenomenon recently? Even though house prices, car prices, and electronic products are all decreasing nationwide, it feels like fewer and fewer people are buying them.

Isn't this strange? Meanwhile, the prices of vegetables, fruits, and daily necessities are rising sharply. The price of cucumbers, green onions, and beans has increased by more than 70%. So why does this phenomenon occur? The only reason is that the era of deflation has arrived.

Many people may know about inflation but do not understand what deflation is. In fact, deflation is scarier than inflation. So what specific differences do deflation and inflation bring to ordinary people? The most obvious difference is the perception issue. If you are currently anxious about money, please like and save this.

Today, I will spend a few minutes helping everyone correctly understand the dangers of the tightening era, so as to prepare in advance for the survival rules in a harsh environment. Today's sharing is about the (Survival Rules in the Deflation Era).

First, let's take a look at some data. In the second quarter of this year, the number of newly registered unemployed in Shenzhen increased by 40% year-on-year. Even if a Didi driver in Guangzhou works non-stop for 30 days throughout the month, their revenue is less than 10,000 yuan. Meanwhile, the vacancy rate of office buildings in Zhongguancun, Beijing, has reached as high as 12.65% this year, ten times higher than before the mask-wearing period, leading landlords to lower rents to attract tenants.

Everyone knows that during inflation, prices rise, and money becomes less valuable. During deflation, prices fall, and one dollar can buy what used to cost two dollars. Based on our actual feelings, we should currently be experiencing deflation. However, according to economics, when interest rates are long-term down, internal competition and technological advancement, or internal competition, can lead to cheaper prices.

You need to know that the global capital market is always a zero-sum game. When someone makes a dollar, someone else loses a dollar. Regardless of how much money is printed, whether it's inflation or deflation, the total amount of resources in the real world remains unchanged. However, for the world's top capitalists, although the total amount of resources doesn't change, the world's population continues to grow. With each increase in population, they gain more sources of wealth. Because whether they are poor or ordinary people, they need to buy their goods and services for their own survival and development, ultimately resulting in the rich getting richer and the poor getting poorer.

So in the first phase of deflation, many ordinary people will feel happy because things are getting cheaper. However, behind the plummeting prices lies a greater risk: currency circulation. If no one spends money, what problems will arise? Once cars and houses are not sold, and inventory products from companies go unsold, will raw materials still be bought? Therefore, deflation means no one is spending money. No spending leads to falling prices, and when no one buys, prices drop, which causes the industry as a whole to fall into internal competition and vicious cycles.

During this period, some companies may even go bankrupt, and some ordinary people may lose their jobs. Some may wonder if inflation doesn’t lead to unemployment too. I want to say that many people have a misconception that unemployment inevitably accompanies an economic crisis. But that’s not the case; there is a significant difference between deflation and inflation. Generally speaking, inflation does not usually lead to large-scale unemployment.

By looking at past data from the United States, we can see that the unemployment rate in the U.S. has long been unrelated to the core CPI. The main reason behind this is that inflation represents an overheated economy, while deflation represents an overcooled economy. In an overheated economy, the worst that can happen is that jobs are found, but wages do not keep pace with rising prices. However, in deflation, you not only have to repay high mortgages, but you also worry about making a living.

Under these circumstances, you enter the second phase of deflation: the perception phase. This allows you to clearly feel some of the life pressures brought about by deflation. However, everyone experiences this pressure differently based on their jobs and industries, and this pressure gradually shifts from being niche to becoming widespread over time.

When widespread salary cuts and layoffs occur, society will enter the third stage of deflation: the panic phase. During inflation, the biggest difficulty for ordinary people is exhaustion 😫 because finding a job is not difficult. At this time, wage increases do not keep pace with price rises, and one job may no longer be enough to support oneself. To escape the predicament, one needs to work multiple jobs, delivering food or driving Didi after finishing a regular job, but at this point, there is not too much pessimistic sentiment.

Periods of high inflation often also represent significant wage increases. Over the past one or two decades in China, we can also see a long period of inflation. During this time, the main increase has been in housing prices, not in overall prices. People have not found it difficult to find jobs, and wages have been rising, but everyone feels exhausted because wage increases have not kept pace with rising housing prices.

However, deflation is different. During deflation, there is a widespread issue of wage decline and unemployment. At this time, you might want to find a part-time delivery job but cannot. So I summarized the process of deflation, which is essentially a process of losing money. From collective salary cuts and layoffs to individual unemployment, it's a chain reaction. Many people online do not understand why car prices have significantly decreased, why various products are getting harder to sell, why doing business is becoming increasingly difficult, and why young entrepreneurs are failing more often, while work pressure is rising yet online activity is increasing. The root cause of all these issues is the chain reaction brought about by deflation. Now you understand why deflation is scarier than inflation, right?

So how do we get through this harsh environment? In fact, the current economic situation resembles the stock market of years past. The tide has retreated, and most people are paying for the wealth and opportunities they originally did not deserve, leading to anxiety. A chaotic era is a process of resource redistribution in society. It will inevitably create opportunities for some while sacrificing others. In this process, all social resources will tend to favor those individuals who do not rely on social dividends but are truly capable.

Finally, I want to say that everything is subject to fate and cycles. The Book of Changes states that extremes must lead to change, and from extreme negativity comes a turnaround. A reversal in the most pessimistic situations is our opportunity. But please remember, a small rebound is both an opportunity and a trap; opportunities and traps are twin brothers. Therefore, resolutely deleverage, preserve cash flow, keep food supplies, and wait for dawn. This is the hardest truth in the deflation era. Do you understand?

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