Deflation

lisyloo

What big areas outside of electronics are there that are discretionary spending?

Cars, holidays, expensive watches or jewelry, health procedures e.g. dental implants, swimming pool/hot tub/garden redesign

How many were you looking for?

BTW - I wouldn't wait a year for any of it for 1%.

Thrugelmir

N1AK wrote: »

Why buy something today when you'd be able to buy it for less in the near future?

Food, energy, petrol, housing? Unlikely people will wait.

N1AK

Bantex wrote: »

Are you sure?

Not at all! It was supposed to be *inflation*, which decreases the value of money over time. A slip of the keyboard!

N1AK

Thrugelmir wrote: »

Food, energy, petrol, housing? Unlikely people will wait.

Feel free to keep listing examples of products people will continue to buy, though I have no idea what you expect it will prove. People spend less during deflationary periods, it isn't conjecture or theoretical models that tell us this; it's multiple real life examples of it happening.

Perhaps you'd like to provide us with an example of a nation going through a deflationary period that benefited most of the working/middle class?

N1AK

IronWolf wrote: »

What big areas outside of electronics are there that are discretionary spending?

I can't see my gf putting off buying a new pair of shoes til next year just because they might be 1% cheaper.

Firstly why talk about 1% cheaper when, in fact, it'll be ~3-5% cheaper in practice. If I don't spend £20k on a new car today and save it at 2.4% (post tax) for a year I'll have £20,480 which will buy me the equivalent of £20,685 worth of stuff in a year.

Secondly, there are dozens of things that can be delayed. Loads of people didn't buy new consoles, HD TVs etc at launch because they knew prices would drop. Even a small contraction in spending due to deflation, potentially caused by businesses decreasing capital expenditure initially, drives further deflation and harms the economy. People spend less when they are worried about the economy, and there jobs, which leads to economic problems getting worse.

If a couple of % didn't influence behaviours then why are savers constantly whining about interest rates being so low? And why should the government do anything if, as you claim they won't change behaviour anyway.

Bantex_2

N1AK wrote: »

If a couple of % didn't influence behaviours then why are savers constantly whining about interest rates being so low? And why should the government do anything if, as you claim they won't change behaviour anyway.

Savers income has not been affected by a couple of percent, but around 80% in most cases.

lisyloo

and save it at 2.4% (post tax) for a year

I'm not sure where you're getting 2.4% net (an old account perhaps or fixed rate) but most of the population won't have access to that kind of rate in a deflationary environment.

wotsthat

Thrugelmir wrote: »

Food, energy, petrol, housing? Unlikely people will wait.

We've lived in an environment of inflation for our whole lives. I don't think any of fully comprehend how we might behave if the purchasing power of money increased over time because goods and services are falling in price.

Pointing out that essentials will remain essential doesn't shed much light on how we may behave.

IronWolf

lisyloo wrote: »

Cars, holidays, expensive watches or jewelry, health procedures e.g. dental implants, swimming pool/hot tub/garden redesign

How many were you looking for?

BTW - I wouldn't wait a year for any of it for 1%.

Cars depreciate as soon as you drive them out of the store so wont have any affect there. Holidays - Id think the majority take at least one a year, they wont miss a year to save a few %.

Still can't really think of anything that I spend money on that I would delay purchasing if deflation hit.

If its essential then I;ll buy it anyway, if its not essential its usually something for instant gratification, and I will still buy it because I want to enjoy myself.

In_For_A_Penny_2

Am I correct in thinking deflation would also have the added effect of increasing your mortgage (in relative terms)?

We're all so concerned about inflation eroding our savings but give little thought to the potential consequences of deflation on debt (including national debt). For all those cheering on the continued low interest rates maybe this is something else to consider.