Deflation

NorthFin

If comodities including oil stay low or go even lower then we are looking more like in a deflationary spiral.

carslet

NorthFin wrote: »

If comodities including oil stay low or go even lower then we are looking more like in a deflationary spiral.

Europe already is

Is it such a bad thing a few years of deflation ?

Generali

carslet wrote: »

Europe already is

Is it such a bad thing a few years of deflation ?

Europe has disinflation rather than deflation I would argue.

There is good and bad deflation. Good deflation is where an economy can simply make stuff better and more cheaply and so prices fall, that's great news.

Bad deflation is where there is too much being made compared to what is bought. As a result prices have to fall regardless of whether a company can afford to cut prices or not. In that situation, companies go bust and people lose their jobs until excess capacity is removed. It's a pretty rotten place to be if you're that 'excess capacity'.

purch

Even though Europe appears to be having the "bad" deflation, I think this should be regarded as the new norm rather than a disaster.

I'm not sure how many people realise that the game has changed.

What occurred between the turn of the century and now has rewritten the rulebook and there is no going back.

carslet

purch wrote: »

Even though Europe appears to be having the "bad" deflation, I think this should be regarded as the new norm rather than a disaster.

I'm not sure how many people realise that the game has changed.

What occurred between the turn of the century and now has rewritten the rulebook and there is no going back.

What do you think the outcome would be

CLAPTON

being able to produce more goods and services than are being bought is of course a wonderful thing :
how can having that capability be a bad thing?


what is wrong is the inability of our market and government mechanisms to match the actual demand (which is there) to the actual production

purch

carslet wrote: »

What do you think the outcome would be

Multi-year low to non existent growth in the Euro-Zone, numerous attempts to artificially promote growth that will fail, and an acceleration in the weakness of the EUR.

It is a currency issue, first and foremost, and the existence of a synthetic currency in the eurozone is the root cause of the lack of competitiveness of their economies.

Bantex_2

CLAPTON wrote: »

being able to produce more goods and services than are being bought is of course a wonderful thing :
how can having that capability be a bad thing?


what is wrong is the inability of our market and government mechanisms to match the actual demand (which is there) to the actual production

Depends on your definition of demand.

NorthFin

Just reading in the paper how fuel and food prices are coming down in this deflationary spiral.

What people forget is how it is going to hurt all those in debt as the value of their debt is going up against everything else, including the UK's national debt.

michaels

NorthFin wrote: »

Just reading in the paper how fuel and food prices are coming down in this deflationary spiral.

What people forget is how it is going to hurt all those in debt as the value of their debt is going up against everything else, including the UK's national debt.

Don't think so - in as much as the fall in food and fuel prices is as a result in a change in global prices so the terms have trade have altered in favour of the UK, given that we are a net importer of both, so actually real incomes and thus the ability to service debts are improving.