Whats wrong with deflation ?

lynzpower

zappahey wrote: »

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.

.the other aspect is of course not buying things that one doesnt need- again, Im not sure why we always seem to talk of electrical goods , but thats a great example.

I dont NEED a new telly until mine literally blows up. I havnet actually had a need to buy a tv for ages, a second hand one tube started to go so I gave that away on freecycle and a mate gave me her old one whne she moved in with Boyf & didnt need 2. Ive had this 5 years. Much as Id like a swanky flatscreen stick it on the wall job I dont need one, so I wont buy one. I might however if they start hitting the 200.00 mark- which they might fairly soon, might be tempted to buy one for fun. I have a stable job though and spare cash- no debts, no mortgage no nothing. So I mgiht. But I probably wont, as if they hit 200, they might go for 150. So Id wait.

Easy to wait when its only something you WANT, not NEED ( like food)

TJ27

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"

Well my comment was intended to be a generalisation and a one line answer. I'm sure any fool could cherry pick several exceptions to that generalisation but I think that the basic principle has at least an element of truth.

worldwheeler

tomterm8 wrote: »

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

With regard to fractional reserve banking?

Think of this: Peter deposits £100,000 in a bank. The bank can now lend 10x this under fractional reserve system. So, the bank lends Paul £1,000,000 to buy a house. It charges Paul a substantial set up fee for this loan. The bank has now created £900,000 of this loan from thin air. So the bank has at risk £100,000 of real asset and £900,000 of fictitious asset. Paul has at risk the whole £1,000,000 as debt to the bank. Paul pays a few years of interest payments to the bank during which time he feels good as the value of his house is rising. Now the market crashes as the credit (supplied by the bank) which drove the value up is suddenly stopped(by the bank). Now Paul is in trouble and the value of his house is in negative equity and he can not keep up the repayments. The bank repossess his house and auctions it for £600,000. This covers the £100,000 deposited by Peter and leaves the bank with a profit of £400,000. Yet on paper the bank can plead a loss of £400,000.
The real transfer of actual asset has been to the bank.

Is this all a case of smoke and mirrors. Is boom and bust not only in the best interest of the banks but also in their control?