Deflation, deflation, deflation

Generali

Clifford_Pope wrote: »

But even a simplified example has to work if it is to demonstrate its point.

Yours did not explain why there should be any different effects from a price fall because of glut from one caused by falling demand.

So what is "real" deflation?

"Real" deflation is a sustained and ongoing fall in the overall price level.

If you think it's so bloody easy, you come up with a 100 or so word example that is comprehensible to an intelligent non-economist.

It's the problem with the interwebs. It's full of people that will pull out a simple error or start nit-picking but won't put up anything better.

martinsurrey

Clifford_Pope wrote: »

But even a simplified example has to work if it is to demonstrate its point.

Yours did not explain why there should be any different effects from a price fall because of glut from one caused by falling demand.

So what is "real" deflation?

In the first case, more is being produced (I assume some of the new found oil is extracted), so the economy has grown in REAL terms, even though there is deflation, this is good deflation (we have more goods to share around, standard of living increase).

In the second, prices are falling, less is being produced, so the economy contracts, this is bad deflation (less being produced to share around, standard of living decrease).

Generali

martinsurrey wrote: »

In the first case, more is being produced (I assume some of the new found oil is extracted), so the economy has grown in REAL terms, even though there is deflation, this is good deflation (we have more goods to share around, standard of living increase).

In the second, prices are falling, less is being produced, so the economy contracts, this is bad deflation (less being produced to share around, standard of living decrease).

Also, the idea at least with the first example is that there is a one-off change to the economy which passes through the price system leaving it changed but the rate of change (after the change) unchanged .

The second example shows secondary and tertiary effects.

antrobus

IveSeenTheLight wrote: »

....P.S. Was the crux of you post just to simply argue? I don't see any value in you post, nor this effort to respond to your queries

That's funny. That's exactly what I thought about your post.:)

RPI? Just "floating it out there"? Hilarious.:rotfl:

antrobus

Generali wrote: »

Also, the idea at least with the first example is that there is a one-off change to the economy which passes through the price system leaving it changed but the rate of change (after the change) unchanged .

The second example shows secondary and tertiary effects.

The change in the price of one particular commodity does not, of itself, produce 'inflation' or 'deflation'. It can do, if you try and avoid the real economic consequences of the price change.

For example, the oil price shock of 1973 certainly triggered a burst of inflation in the UK. The price of oil quadrupled almost overnight, thereby rendering everybody in the UK slightly worse off. The refusal of certain people (like trades unions) to recognise this fact, fed a cycle of wage and price rises.

The thing about a reverse shock, as in a fall in oil prices, is that no one is likely to complain about its effects. Hence, there is a much lower risk of it triggering anything.:)

IveSeenTheLight

antrobus wrote: »

That's funny. That's exactly what I thought about your post.:)

RPI? Just "floating it out there"? Hilarious.:rotfl:

In an effort of reflection, where was I arguing in post 28?

I agreed with Generali's point, then offered to consider that RPI was still 0.9%.

I then offered to back up my previous post by pointing out the biggest savings were in transportation as a result of the oil price decline.

I certainly didn't intend to be argumentative by responding such as
"And? What's your point?"
or questioning the reproduction of graphics to illustrate a point.

I still don;t see the value you added to this thread in those posts, or indeed my replies to your responces

antrobus

IveSeenTheLight wrote: »

In an effort of reflection, where was I arguing in post 28?

I agreed with Generali's point, then offered to consider that RPI was still 0.9%.....

And CPIH was 0.2% what's your point?

IveSeenTheLight wrote: »

...I then offered to back up my previous post by pointing out the biggest savings were in transportation as a result of the oil price decline.

I certainly didn't intend to be argumentative by responding such as
"And? What's your point?"
or questioning the reproduction of graphics to illustrate a point.

I still don;t see the value you added to this thread in those posts, or indeed my replies to your responces

And I don't see the "value you added to this thread in those posts". You were simply repeating what was in the opening post and "floating" some thing about RPI "out there" but you don't quite know what it is.

I just think it's funny.:rotfl: