Ze, 'Ow you say, Deflation Watch. Eurozone edition

Generali

ILW wrote: »

But you could be increasing your turnover by outselling your competiton due to lower prices, due to not having any financing costs to pay.

Not saying this is how it is, but saying it is possible to run a successful business in times of deflation which could favour the cash rich companies.

Fair point and if you want to make some money oh of it there's something called a 'pair trade' where you short one company and go equal and opposite long the other. You make money from the company you are long doing better than the company you are short.

They can both do badly or well but it's the relative performance you're interested in.

Let's try to stay on the topic of deflation though.

wotsthat

Graham_Devon wrote: »

We could do without this "debt" and it wouldn't ruin us, would just make it more difficult to order stuff.

Explain then how you'd procure an MMR vaccine for your kids without any debt.

Graham_Devon wrote: »

Anyway. I don't mean this to be rude, though it may come across as such.....on asking what the disadvantages are, we appear to be down to hairdressers or companies with high debt levels and procurement credit accounts. It doesn't sound that scary to me.

Well there's no need to be scared I'm sure but it's a little disappointing that that's all you've taken from the thread.

Graham_Devon

wotsthat wrote: »

Explain then how you'd procure an MMR vaccine for your kids without any debt.

Easy. They are free.

But....to answer your point. You can pay by BACS to all of the organisations we use at the point of order before they release it. Can also use credit or debit cards.

We don't, simply because it's easier to allow those who use the stocks to replenish them. It doesn't mean we want them to have access to financials.

wotsthat

Graham_Devon wrote: »

Easy. They are free.

But....to answer your point. You can pay by BACS to all of the organisations we use at the point of order before they release it. Can also use credit or debit cards.

We don't, simply because it's easier to allow those who use the stocks to replenish them. It doesn't mean we want them to have access to financials.

Credit cards are debt.

You very carefully haven't answered the point - I very much doubt that your whole supply chain operates (or could) without debt oiling the process.

I don't know what you do so can't really argue. How would you buy that vaccine or a T-Shirt from Tesco that was made in Bangladesh without any debt?

Why not just admit it's close to impossible - it won't make you a debt junkie.

Graham_Devon

wotsthat wrote: »

Credit cards are debt.

You very carefully haven't answered the point - I very much doubt that your whole supply chain operates (or could) without debt oiling the process.

I don't know what you do so can't really argue. How would you buy that vaccine or a T-Shirt from Tesco that was made in Bangladesh without any debt?

Why not just admit it's close to impossible - it won't make you a debt junkie.

I really don't understand your point.

We are talking about deflation and debt and how that can effect companies and effectively see their demise.

Deflation really isn't going to affect payments on a 30 day credit account.

If it were, we'd be so far up !!!!!! creek anyway it really wouldn't be worth worrying about.

Theres a large difference between the definiton of debt (loans with fixed payments secured against assets) and a 30 day credit account. We're arguing pure technicalities and descriptives. I'm not sure why.

wotsthat

Graham_Devon wrote: »

I really don't understand your point.

We are talking about deflation and debt and how that can effect companies and effectively see their demise.

Deflation really isn't going to affect payments on a 30 day credit account.

If it were, we'd be so far up !!!!!! creek anyway it really wouldn't be worth worrying about.

Theres a large difference between the definiton of debt (loans with fixed payments secured against assets) and a 30 day credit account. We're arguing pure technicalities and descriptives. I'm not sure why.

I believe it started when we discovered that you define loans as debt and credit as 'debt'. You said we could manage without 'debt' and when challenged wanted to get back on topic..

But back on deflation yes I'd agree that 30 day credit accounts would be the least of our worries.

I might have to dip out of this one now - just off to warn the hairdressers.

ILW

wotsthat wrote: »

I believe it started when we discovered that you define loans as debt and credit as 'debt'. You said we could manage without 'debt' and when challenged wanted to get back on topic..

But back on deflation yes I'd agree that 30 day credit accounts would be the least of our worries.

I might have to dip out of this one now - just off to warn the hairdressers.

Ask them for 90 days net terms.

tomterm8

What causes deflation?

That's the key, I think. In a gold backed currency deflation can be caused by the supply of money growing more slowly than the growth of goods. A gold backed currency is naturally deflationary.

But that isn't the case in a debt based currency like the one we have today. In a debt based currency the amount of money we have is ultimately determined by a combination of the bank of england and the banks.

In normal times, deflation has to be impossible except as a policy decision by the government(Or by the governments agent, a central bank).

So... how do we get deflation when the central bank and government does not want deflation?

Now, my opinion is that deflation and hyperinflation are essentially caused by the same things. Both of them are caused by governments who lose control of the monetary system. That's part of the key to the reason deflation is always a problem: the only situation where it can exist is an existential crises for a nation.

Thrugelmir

Graham_Devon wrote: »

Why couldn't they deflate in a deflationary environment?

Deflation is, by definition, the costs of goods and services going down. You can't really have deflation without, well, deflation.

I don't understand why the costs of those goods cannot fall? What would be deflating if it's not those costs?!

If you want to cut costs then wages / headcount is the easiest route. Try breaking a property lease or obtaining a reduction in business rates.

Graham_Devon

wotsthat wrote: »

I believe it started when we discovered that you define loans as debt and credit as 'debt'. You said we could manage without 'debt' and when challenged wanted to get back on topic..

Sorry, that was Generali who defined credit payment accounts as debt. Not me.