Now LOWER prices produce the SAME result?
It is called a deflationary cycle. At first us common people cheer the relief in prices, but that relief comes with a hidden price. Ideally, the excess dollars you would save at the pump would be spent elsewhere, but given the severe recession and stagnate economy it gets put either into savings or debt repayment. Essentially, the currency goes out of circulation.
As demand decreases employers cut hours or layoff workers, no new work is created, and production of any kind grinds to a halt. Banks then are faced with people who thought they would save, now depleting funds, interest rates drop(to where from here?), lending stops, and you thought the crash of 2008 was bad? This is a much, much worse scenario.
Why is it worse? Because we had a faux recovery. Obama’s administration was too afraid to allow the natural economic deflationary cycle to happen in 2009/10 and instead pumped all that money into the system. That money needs to leave the system somehow as it is fake.
Do a google search for Why is Deflation Bad. The only disagreement I have with most of the articles is that people will hoard money, right now that isn’t the case as nobody experienced a recovery and have been living on credit cards or the government. Any excess cash will be put towards personal debt. It is that giant sucking sound we all keep hearing about....