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The more I think about inflation, the more I disagree with its basic premise. Inflation is the main cause of the "grow or die" mentality and the many sustainabi

The more I think about inflation, the more I disagree with its basic premise. Inflation is the main cause of the "grow or die" mentality and the many sustainability issues that come with it. You can not afford to have a steady business that isn't growing, because inflation will slowly eat away your margins until you are operating at a loss. Especially since the reported inflation (under 5% in most developed countries) is far from the actual value seen by most businesses (between salary increases, rent increases, supply increases). It takes less than 15 years for a non growing healthy business to go bankrupt. Inflation is also the main cause of quality decline seen in absolutely everything. When you can not raise prices as fast as your costs are increasing, the only viable option is to lower quality. This inevitably happens every where and is pretty much an accepted fact of life. It's not that companies want to give you a crappier product or service, it's that they have to. I'm a huge skeptic of all crypto currencies in their current forms, but the deflationary part was one of the ideas that I really liked (not that any government would ever go for a deflationary policy)

majormajor 6y ago
If all your costs are inflating, why wouldn't you also be inflating your prices in line? This seems to be what happens in restaurants or groceries or other things where we go "wow, you used to get a coke for fifty cents!" A business that can't pass that cost on seems to have more fundamental "loss of relative demand compared to the past" issues that would squeeze it dry even without inflation. In that world, your costs would be static but customers would be willing to pay less over time, so you'd die.
- fgonzag 6y ago
  Market dynamics. The cost to produce goods rises much more rapidly than what you can actually sell your product for. People would simply stop buying if you increased prices 12-13% every year (which is what is typical for me in the restaurant industry in Mexico) New entries usually start with a lower quality product by default, so you usually have to keep prices and drop quality if you don't want to be priced out (or move into a far more upscale and finicky market).
  - glasss 6y ago
    My company (not an owner) is a services based company with yearly agreements. We bake in price increases annually with inflation. If you are not a business running on fixed agreements, you have the right to increase your prices whenever to accommodate your costs. If your idea is that consumers will just go somewhere cheaper, then it works upstream too - you have the option to source your products / goods from somewhere cheaper as well. If there is no cheaper alternative for you, then there must be no cheaper alternative for your consumers, unless you aren't operating your business in an efficient manner. In which case the market will either force you to, or you will lose your business.
arcticbull 6y ago
> Inflation is also the main cause of quality decline seen in absolutely everything. Optimization is the main cause of quality decline. Inflation has nothing to do with this. Inflation is neutral as it raises all prices equally.
- logicchains 6y ago
  >Inflation is neutral as it raises all prices equally. This is not true if the inflation is a result of currency creation, as in that case the inflation first affects the things purchased by those receiving the newly created money.
  - neatze 6y ago
    Inflation by definition is a result of supply/demand disequilibrium, in another words to much many is chasing to few goods. I agree that root problem is optimization, this is evident in natural living systems too. Furthermore, in general world is growing, there always will be error between actual world growth and expected one.
notahacker 6y ago
> When you can not raise prices as fast as your costs are increasing, the only viable option is to lower quality. If you can't raise prices as fast as your costs are rising, it's a signal the market prefers reduced quality to higher prices for your product. Deflation certainly isn't going to help you there, especially since it means consumers will expect you to actually drop your prices, with some even deferring purchases whilst waiting, and you'll struggle to borrow money when lenders reason that [i] you'll make less revenue next year and [ii] they don't need to risk lending money for it to be worth more than last year; they can just bury it in the ground...
- arcticbull 6y ago
  Further to your point, deflation means you drop your prices separate to what your customers "want." Rather, customers are willing to pay less day over day as they require an incentive to spend their money over its risk-free return under their mattresses.

majormajor 6y ago

If all your costs are inflating, why wouldn't you also be inflating your prices in line? This seems to be what happens in restaurants or groceries or other things where we go "wow, you used to get a coke for fifty cents!" A business that can't pass that cost on seems to have more fundamental "loss of relative demand compared to the past" issues that would squeeze it dry even without inflation. In that world, your costs would be static but customers would be willing to pay less over time, so you'd die.

fgonzag 6y ago
Market dynamics. The cost to produce goods rises much more rapidly than what you can actually sell your product for. People would simply stop buying if you increased prices 12-13% every year (which is what is typical for me in the restaurant industry in Mexico) New entries usually start with a lower quality product by default, so you usually have to keep prices and drop quality if you don't want to be priced out (or move into a far more upscale and finicky market).
- glasss 6y ago
  My company (not an owner) is a services based company with yearly agreements. We bake in price increases annually with inflation. If you are not a business running on fixed agreements, you have the right to increase your prices whenever to accommodate your costs. If your idea is that consumers will just go somewhere cheaper, then it works upstream too - you have the option to source your products / goods from somewhere cheaper as well. If there is no cheaper alternative for you, then there must be no cheaper alternative for your consumers, unless you aren't operating your business in an efficient manner. In which case the market will either force you to, or you will lose your business.

arcticbull 6y ago

> Inflation is also the main cause of quality decline seen in absolutely everything. Optimization is the main cause of quality decline. Inflation has nothing to do with this. Inflation is neutral as it raises all prices equally.

logicchains 6y ago
>Inflation is neutral as it raises all prices equally. This is not true if the inflation is a result of currency creation, as in that case the inflation first affects the things purchased by those receiving the newly created money.
- neatze 6y ago
  Inflation by definition is a result of supply/demand disequilibrium, in another words to much many is chasing to few goods. I agree that root problem is optimization, this is evident in natural living systems too. Furthermore, in general world is growing, there always will be error between actual world growth and expected one.

notahacker 6y ago

> When you can not raise prices as fast as your costs are increasing, the only viable option is to lower quality. If you can't raise prices as fast as your costs are rising, it's a signal the market prefers reduced quality to higher prices for your product. Deflation certainly isn't going to help you there, especially since it means consumers will expect you to actually drop your prices, with some even deferring purchases whilst waiting, and you'll struggle to borrow money when lenders reason that [i] you'll make less revenue next year and [ii] they don't need to risk lending money for it to be worth more than last year; they can just bury it in the ground...

arcticbull 6y ago
Further to your point, deflation means you drop your prices separate to what your customers "want." Rather, customers are willing to pay less day over day as they require an incentive to spend their money over its risk-free return under their mattresses.