Deflation

ceridwen

I'm no economics expert - mind you one could hardly do worse than those top bankers - errr....but why precisely are we being told "We could have deflation - and that would be a BAD THING".

Errr.....why would it be a bad thing? As "yer ordinary person in the street" - I'm just thinking "lower prices would be a good thing" - so what is the reason we are being told deflation would be a "baddie"??

I'm also not following the "logic" of why there is pressure on to literally print more money - errr....why? My "ordinary person in the street logic" tells me that the more banknotes that are around the less each banknote would be "worth" in terms of buying power - hence we'd be at risk of having to use a lot more banknotes to buy anything - and hyperinflation resulting (or are we going to print those banknotes regardless - just to hand physical cash over to foreign investors trying to withdraw their money from Britain - and blow what happens to us?)

Generali

There are many problems with deflation, here are a few:

1. It reduces consumer spending and thus employment in sectors connected to that (for example retail and manufacturing_ - why buy something today if it'll be cheaper tomorrow?
2. It is bad for debtors as the money they have to repay is worth more than the money they borrowed. As just about every company and Government in the world is run on debt, this is a big problem. As a result, investment falls a lot, reducing GDP and employment.
3. It can become self-fulfilling. Deflation begets more inflation as reduced consumer spending => reduced prices (ie deflation) => reduced consumer spending.

beingjdc

It is a good thing unless

1) You're in debt and your debt becomes a bigger number in real terms
2) You work for a company whose products are deflating, and they cut your wages

ceridwen

Ah...I see....according to that I become a "schizophrenic" then.....ie deflation would be good for me personally (as I thought) - but could be bad for the economy as a whole (as I dont have debt and my wages wont be cut).

Errr...and we bring a 3rd Party into this - ie the Environment. Deflation would be good for the environment then - less spending by consumers because they anticipated goods would be cheaper "tomorrow" would mean less stuff bought would mean less of the Planet's resources used.

The picture is getting clearer.

Generali

ceridwen wrote: »

my wages wont be cut

On what basis do you assume your wages won't be cut?

ceridwen

Long story.....and my employers presumed wish to live....

Generali

ceridwen wrote: »

Long story.....and my employers presumed wish to live....

Ok. What if your employer goes bust?

ipod_killed_the_musicshop

Generali wrote: »

Ok. What if your employer goes bust?

That won't happen;)

StevieJ

ipod_killed_the_musicshop wrote: »

That won't happen;)

I bet he/she mans the printing presses