Una explicación muy simple de por qué el ajuste de precios salarios de los austéricos/clásicos tiene efectos contractivos.
In the first four years of the Great Depression, prices and wages fell a remarkable 30 percent. Households had accumulated huge debts, and such rapid deflation devastated the overall economy. Wages fell precipitously, but debt obligations remained the same in dollar terms. So households that already cut back on spending due to high debt were forced to cut back even more. During the Depression, debt and deflation created a deadly mix that amplified the levered-losses forces we’ve discussed.
Debt and deflation are natural partners in crime. When indebted households cut spending, stores cut prices to boost overall sales. However, this is sustainable only if the firms that lower prices also lower wages to reduce costs. Thus lower demand translates into lower wages, which exacerbates the problem further by increasing households’ debt burdens compared to their income. This forces households to cut back on spending even further. And so on.
The great American economist Irving Fisher called this vicious cycle "debt deflation." As he put it in 1933, "I have . . . a strong conviction that these two economic maladies, the debt disease and the price-level disease, are, in the great booms and depressions, more important causes than all others put together."1 His was a distributional argument. Because debt contracts are fixed in dollar terms deflation makes it more onerous for the borrower to repay his debts. On the other side, the creditor gains from deflation because he can purchase more goods from the same interest payment he receives on his loan. Deflation is a mechanism that transfers purchasing power—or wealth—from debtors to creditors.
So if deflation takes purchasing power away from debtors, does inflation help soften the blow by giving purchasing power back to debtors? In principle, yes. An increase in prices and wages makes it easier for borrowers to use their higher wages to pay back their fixed-debt obligations. Likewise, higher prices reduce the value of interest payments to creditors. The higher marginal propensity to consume for debtors means that such a transfer in purchasing power is beneficial for the overall economy—debtors spend out of an increase in purchasing power more than creditors cut spending in response to the same loss. Which brings us to the importance of monetary policy. By the logic above, if monetary policy can prevent deflation and support inflation, it can reduce the ill effects of a debt-driven recession.
Debt and deflation are natural partners in crime. When indebted households cut spending, stores cut prices to boost overall sales. However, this is sustainable only if the firms that lower prices also lower wages to reduce costs. Thus lower demand translates into lower wages, which exacerbates the problem further by increasing households’ debt burdens compared to their income. This forces households to cut back on spending even further. And so on.
The great American economist Irving Fisher called this vicious cycle "debt deflation." As he put it in 1933, "I have . . . a strong conviction that these two economic maladies, the debt disease and the price-level disease, are, in the great booms and depressions, more important causes than all others put together."1 His was a distributional argument. Because debt contracts are fixed in dollar terms deflation makes it more onerous for the borrower to repay his debts. On the other side, the creditor gains from deflation because he can purchase more goods from the same interest payment he receives on his loan. Deflation is a mechanism that transfers purchasing power—or wealth—from debtors to creditors.
So if deflation takes purchasing power away from debtors, does inflation help soften the blow by giving purchasing power back to debtors? In principle, yes. An increase in prices and wages makes it easier for borrowers to use their higher wages to pay back their fixed-debt obligations. Likewise, higher prices reduce the value of interest payments to creditors. The higher marginal propensity to consume for debtors means that such a transfer in purchasing power is beneficial for the overall economy—debtors spend out of an increase in purchasing power more than creditors cut spending in response to the same loss. Which brings us to the importance of monetary policy. By the logic above, if monetary policy can prevent deflation and support inflation, it can reduce the ill effects of a debt-driven recession.
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