Whats wrong with deflation ?

bluey890

Masomnia wrote: »

Us? Who do you mean exactly?

It was me - I invented it in the early 1800's.

I'll come quietly. Non-violently, like Gandhi.

martinman3

If we don't want a world economy which requires constant growth and price inflation to work correctly we could always choose an alternative.

A 'Logan's Run' economy where population is strictly controlled and everyone must die at 30.

cogito

There's good deflation and bad deflation. The 32" LCD TV that cost £1000 five years ago now costs £400 simply because production costs have come down. Same thing with computers and other electrical goods. That's good.

Bad deflation is the situation we could be heading towards now where people hold back buying things in the belief that they'll be cheaper next month. Production falls and people lose their jobs.

tomterm8

Masomnia wrote: »

Us? Who do you mean exactly? I doubt it was the British who invented fractional reserve banking, I guess that's what you meant.

It's the kind of thing that keeps on getting reinvented... for example, the goldsmiths guild in London invented it, but also the Knights templar, and there are even examples in prehistory. There are historic examples of Credit Crunches recorded in Ancient Rome, for example.

We did invent the modern central bank, though, and Britain was the first really modern financial economy.

Deflation was not always bad. It very much depends on your financial system. Before, say, 1800 deflations was very much the normal state of affairs, and encouraged savings and genuine wealth creation. People barely noticed it.

If you want to know why deflation is considered bad, you need to google "the debt-deflation theory of great depressions" by Irving Fisher.

RobertoMoir

needahome wrote: »

sorry but that's b0ll0cks, electrical goods become cheaper all the time, it doesn't stop people from buying them.

as for food, i can hardly see someone saying to their family "we're not eating this week, as the food will be cheaper next week"

Think big picture, instead of about small scale stuff. A successful economy relies on the movement of money and any high levels of inflation or deflation that curtail this cause a problem. This is not about chicken kievs and MP3 players. Or rather it's about a lot more than that.

Davesnave

bluey890 wrote: »

Ps. I avoided posting an erection joke.

Thank you for your consideration. At my age, they scare me stiff.

Degenerate

bluey890 wrote: »

Supply and Demand carries on regardless. Deflation would reduce consumption, and in doing so make the planet more 'green'.

If we really want to be "green", we could go back to living in caves.

SingleSue

cogito wrote: »

There's good deflation and bad deflation. The 32" LCD TV that cost £1000 five years ago now costs £400 simply because production costs have come down. Same thing with computers and other electrical goods. That's good.

Bad deflation is the situation we could be heading towards now where people hold back buying things in the belief that they'll be cheaper next month. Production falls and people lose their jobs.

That has always been my mantra (apart from essentials like food), whenever ex hubby wanted something large like an expensive new games system, I always made him wait as it would be cheaper after Christmas or to wait a few months for it to come down. Same with televisions, we never purchased as soon as they came out but when they came down to sensible amounts.

Now I don't buy those items at all....wonder what that is called! :rotfl:

zappahey

ess0two wrote: »

'Loads' how many?

Well, I don't keep count, but I work in IT so I'm forever being asked for advice on what to buy and people are often reluctant to buy today when it's going to be cheaper tomorrow.

Regardless of the number, it is clearly false to suggest that "electrical goods become cheaper all the time, it doesn't stop people from buying them." as it does stop some and that is enough to make a difference.

zappahey

ess0two wrote: »

Perhaps so,i tend to be the kind of person that buys something when i need it.
I needed a new TV i could wait a month and listen to the radio,or buy straight off and enjoy it.

Fair enough but much of the modern, consumer-driven economy is built on want rather than need.

Like you, if I need something, I'll buy it straight away but if I want something then I'm more likely to wait a while until I get a better deal.