“deflation” = rising purchasing power of the dollar. How is that bad?
It’s not bad, but some people with degrees in economics think it’s bad.
It’s good because it retains and possibly increases the value of savings and property.
Yes and no. Your liquid savings will increase in purchasing power, but your property will lose value, able to command progressively fewer of those dollars. Then the danger is that everyone will simultaneously move their assets to cash, further depressing the prices of investments. Look at Russia a few weeks ago when the currency was in free fall and people were rushing out to buy things ahead of price rises. Now imagine the opposite, with everyone trying to sell everything.
Deflation is bad, very bad for local, county and state governments that rely on property taxes. Those taxes are calculated against the nominal value of property.
What happens is an assessor is given a demand for tax monies from a variety of sources - municipalities, school districts, park districts, library districts, water/sewer districts, etc. - and then spreads this level of taxation according to a formula based on property values.
In reality, it’s a lie. They just distribute the demand for taxes across property, but if you get yours lowered, they raise somebody else’s later on. The goal is simply to collect a tax and the lie is that your property is valued at a certain level.
Now imagine that the market deflation in Real Estate that we had back in 2008-9 didn’t bounce back via the ZIRP of the FED? Prices in many areas were down by 20%-40% and in some urban areas 70%+. That means that you’d expect your tax assessment to fall by 20-70% or whatever your new value was. Bush was shown this and the FED realized the incredible damage done to the debt markets via municipal bonds that then couldn’t be paid.
Nearly every major metro would have gone bankrupt. That would have killed government schools (nearly half of all property tax bills), government pensions and the entire socialist model of urban government. That chaos is why the banks got bailed out and why interest rates are being held below market rates today.