Over the past couple of years, those engaged in business have noticed a significant shift in the marketplaceProducts are struggling to fetch their expected prices, leading to a situation where many items are left unsoldThis scenario has resulted in merchants being forced to lower their prices in a bid to attract buyersIt’s a puzzling state of affairs that defies conventional economic theories, particularly regarding inflation and its impact on prices.

In a typical economic landscape characterized by a loose monetary policy, one would expect to see rising inflation and an increase in pricesHowever, the reality is quite the oppositeWhile there is indeed currency inflation occurring, the prices of everyday consumer goods are experiencing a process of deflationThe concept of a 'sinking economy' has emerged as a dominant force in the current market.

The persistent price wars waged by businesses can be attributed to a survival instinct in an incredibly competitive environment

This phenomenon, often erroneously labeled as 'malicious competition' or 'vicious internal strife,' is more about adaptation to a changing economic landscape and less about greed or unethical practicesNevertheless, these competitive pricing strategies underscore a broader issue — the fundamental role that monetary and credit policies play in shaping the economy.

Take a moment to consider historical instances of hyperinflationDuring the era of the Republic of China, there were reports of individuals carrying sacks of money just to buy riceIn Zimbabwe, hyperinflation reached staggering levels, leading to the issuance of banknotes valued in the hundreds of trillionsUnder such extreme circumstances, the purchasing power of money diminishes drastically; something that could cost a handful of bills today may require an entire truckload tomorrowIt’s a sobering reminder of the fragility of currency and the economy at large.

Given that we are operating with a circulation of three hundred trillion units of currency, one has to ask: why is it that prices for most goods are on the decline instead of increasing?

The reasons can be multiple

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Firstly, businesses are engaged in fierce price competition to secure their survival amid diminishing consumer spendingSecondly, the strategies employed by these businesses often stem from market research that reveals a critical insight: the current consumer landscape is retractingCompanies that focus on mid to low-end offerings are the ones finding any semblance of success, giving rise to what is so aptly termed the 'sinking economy.'

Platforms like Pinduoduo exemplify this trend, capitalizing on collective buying efforts to drive down pricesHowever, this race to the bottom comes with its own set of challenges, namely the proliferation of substandard products and counterfeit goods, which can erode consumer trustA poignant example of this dilemma can be found in the case of the popular Chinese animated series "Three Sheep," which was pulled off the air due to accusations of promoting shoddy merchandise.

Moreover, the sinking economy is profoundly linked to the financial realities affecting the average citizen

As it turns out, many people simply do not have money to spendThe funds available to them are either earned through labor or obtained through loansHowever, in today's landscape, making money is no easy feat, and borrowing money is even more arduousFor the average citizen, difficulty in securing loans correlates with struggles in income generation.

Compounding this problem is the greater issue facing businessesChen Daibing, a relatively well-known entrepreneur, was unable to secure traditional financing avenues and took the risk of borrowing from online loan sharksHis company's operational delay left him unable to meet repayment obligations, leading to relentless collections and ultimately tragic outcomesThis story is a stark reminder of how the inability to borrow can stifle economic growth and job creation.

The money that online lenders utilize ultimately originates from banks, making them complicit in a financial system that offers high returns absent of significant risk to the lenders

This relationship results in a binary outcome wherein either businesses or individual consumers are left to deal with exorbitant interest rates, or they simply cannot obtain financial support at all.

Thus, we find ourselves in a peculiar situation where currency is inflating, yet prices are deflatingThe crux of the issue lies in a financial system suffering from a sort of blocked artery — the flow of credit to the economy has been severely constrictedThe arteries that nourish our economic organism have become clogged, leading to a stagnation that is impacting every sector.

At the heart of this predicament is a credit system that has overreached to the point it is stifling overall economic growthWhile it is acknowledged that a credit system requires trust, the current approach has led to an overwhelmingly restrictive environment, risking a complete systemic failureIndeed, there are concerns that we are on the precipice of a significant credit collapse.

Even more frustrating is the contradictory nature of financial practices today

Many adhere to the credit regulation laws superficially, yet engage in illicit practices behind the scenes, such as enjoying kickbacks on loans or colluding with intermediaries to create avenues for fraudulent money borrowingSuch actions highlight the disparities between established regulations and the manipulative tactics employed to bypass them.

As individuals become increasingly aware of the looming risks, there is a collective shift back to a more conservative financial mentality, reminiscent of times when saving was more emphasizedHowever, during this transition period, many find themselves losing their savings through risky investments or falling victim to scams.

The declining prices of everyday goods provide tangible evidence of consumer behavior and sentimentUnlike the housing sector, which may still grapple with market bubbles, the prices of essential goods reflect a more stable environment with fewer speculative elements driving decisions