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"Unfortunately much of the financial system (in the US anyway) is highly dependent on population growth." I came to this discussion ctrl-f'ing for "deflation"

• shortandsweet 6y ago
  Why do you feel we're living in deflationary times?
  • lurquer 6y ago
    Don’t mean to butt in, but personally, the fact that I’m typing this on a piece of $300 hardware (phone) that would have cost millions in the 80’s, hundreds of thousands in the 90’s, and definitely over a thousand in the 00’s is a good indicator.
    • ryder9 6y ago
      that's economies of scale and manufacturing momentum, nothing to do with deflation
    • u801e 6y ago
      I think computer hardware is one of the few things that decreased in price over time. The price of most other good and services has definitely increased since the '80s.
    • Supermancho 6y ago
      And despite the same technological improvements, gasoline is decisively more expensive. Technology is purely deflationary, so the situation with phone cost isn't very telling. What is more impactful is the cost of phone service vs median income across those decades, despite technology's deflationary forces.
      • nradov 6y ago
        Gasoline pump prices are highly impacted by taxes and regulations so those don't tell us much about core inflation or deflation. Look at the spot price of crude oil on international markets. The price today is still well below previous peaks.
    • UncleOxidant 6y ago
      Been to the grocery store, ordered takeout or tried to buy a house lately? The prices of electronics (calculators, watches) fell consistently throughout the 70s which was a period of very high inflation. You can't cherry pick one sector.
      • lurquer 6y ago
        Of course. It is very difficult to get a good number across all sectors. Despite my post, I’m not all that convinced we are in a deflationary period. The bell-weather asset for me would be Gold, and its price since I’ve been alive wouldn’t make me lean towards deflation. If anything would, I suppose it would be the number of hours worked. That is, how much labor does it take to support a reasonable lifestyle. In my experience — and I’m an old geezer, so take this with a grain of salt — it seems like a lazy bastard can get by in this world a lot easier than 100 years ago. The degree of manual back-breaking labor that went into earning a dollar has decreased significantly. I don’t know how that would get figured in.
        • nradov 6y ago
          Gold prices aren't highly correlated with inflation so that would be a poor indicator. If you look at the actual historical data, gold isn't a very effective inflation hedge.
        • sandworm101 6y ago
          >> It is very difficult to get a good number across all sectors. That's what cost of living indexes are for. >> The bell-weather asset for me would be Gold You probably mean to say gold futures or gold-based derivatives. There are more people who think they own "gold" than there is physical gold on this planet. Unless you have a bar in your hand, you own a contract tied to the price of gold, ie paper.
  • newsclues 6y ago
    Exactly. Just because tech is cheaper doesn’t mean food or my cost of living has decreased.
  • deelowe 6y ago
    Because we are. Without taking action to curb it, the US will start to see deflation take hold. This is due to an overall aging demographic who are beginning to leave the workforce, an overall increase in savings/investment across the population, lowered rates of consumption, the younger demographic having less children, higher rates of education and on and on. This has already begun to in both Germany and Japan. In the former, they've been able to curb things through government intervention. Japan on the other hand has really struggled.
    • pojzon 6y ago
      On the contrary the price of up-keeping a household has increased dramatically. 30-40y ago it was not uncommon for a single pension to cover all expenses of: - food - car or two - paying a mortage - having 4 kids going to school - other household expenses - saving up money / Currently it is not possible. How in such a case do you still think we live in deflation times? I would rather say that “some things” became cheaper due to technology advancements, but common things inflated so drastically, its literally impossible for young people to start families with sustainable life.
      • deelowe 6y ago
        A fairly simplistic empirical examination of the monetary policy since 2009 proves this: - Historically low mortgage rates - Decreasing bond yields - Increasing withdrawals from 401k and other retirement funds - Increased savings rates for the younger demographic - Reduction in consumer spending - Over a decade of QE
        • pojzon 6y ago
          Low rates and reduction in consumer spending are rather signs of recession not deflation.. From 2008 crisis pretty much every country in the world is printing money like crazy. Its easy to print more digital numbers, its harder to gain actual land to inhabit ppl. Thats why properties and land gain so much value lately and thats why its the biggest issue of them all - huge inflation in the housing department.
  • AnimalMuppet 6y ago
    I also would like to hear rsync's answer. But I'll make a guess: The (world) population is no longer growing (much). But productivity growth hasn't stopped. The result is that stuff gets cheaper, that is, the same number of dollars buys more. That's deflation. Worse, we've gotten to the point where many people have what they need - not necessarily everything they want, but most of what they need. (I'm not going to buy twice as much food if my salary doubles. I'm not going to drive twice as many cars. I'm not going to buy a house that's twice as big. I'd use almost all the money to pay off debt and to invest.) That makes it hard to create inflation in the basic stuff, because you can't make demand exceed supply.
    • treis 6y ago
      >The result is that stuff gets cheaper, that is, the same number of dollars buys more. That's deflation. It's more about the number of dollars out there. Fractional reserve means that a dollar saved leads to dollars being created. Boomers saving up for retirement meant lots of dollars being created. Boomers withdrawing and buying stuff means lots of dollars will be destroyed. Fewer dollars means dollars become more valuable i.e. deflation.
• agent008t 6y ago
  What do you mean? Inflation can be easily created - just create more dollars and credit them to people's bank accounts; you will soon see all kinds of prices going up.
  • brandmeyer 6y ago
    If this was true, then the monetary policies of the 2008 financial crash and the 2020 pandemic would both have created consumer price inflation. They haven't. We've seen some asset price inflation instead. In effect we did create a bunch of dollars and credited them to people's home equity and mutual funds... where it just sat there doing a whole bunch of nothing to consumer prices and wages.
    • WillPostForFood 6y ago
      2008 policies wasn't that effective at putting money in people's pockets though. 2020 was more effective, but probably to early to tell if it is inflationary until lockdowns go away and people have more options to spend?
    • agent008t 6y ago
      Take it to the extreme. What do you suppose would happen if every American household is credited with a billion dollars tomorrow?
      • toss1 6y ago
        Good thought experiment Not nearly as much inflation as you might think Most of everyone's newfound Billion would sit idle The inflation would come from the $200K/year everyone was spending, as in if you just gave everyone $200K*expectedRemainingLifeExpectancy, you'd get the same consumer inflation The extra billions would go into inflating assets. The key concept here is velocity of money - really interesting concept that surprisingly (at least at first for me) falls out of the formulas in Econ1 classes. It does relatively equate to the actual turnover of a piece of currency, as in how many times does that George Washington bill change hands in the year after you spend it? The key policy hack is to give help to people who will SPEND the money, not to banks and corps who will just park it in investments. That gets the multiplier effect you need out of crashes.
• mindslight 6y ago
  > however: the world we are living in is massively deflationary and even dramatic and innovative attempts to maintain (low) inflation are barely keeping us above water That reflection isn't looking down at the surface of the water, but rather up at the air that we need to head towards to stop drowning. Monetary inflation is a large part of what's killing the middle class. All that offshoring was supposed to cause lower prices to compensate for decreased need for domestic labor. Instead a whole bunch of monetary inflation was induced to force everyone to keep working the same amount, at jobs that no longer exist. As long as the Fed continues with its maladaptive policy that is directly opposed to technological progress, most all productivity gains will continue accruing to the upper class.
• imtringued 6y ago
  If we were truly suffering from an aging society then where is all the inflation? Where are all the rich old people spending their money but not finding enough workers to do everything they saved their money up for? It's probably because retirement has to be financed by the individuals themselves. Nowadays retirement means cutting spending today so that you can spend tomorrow. There are rich old people who aren't cutting down on spending but simply keep saving their wealth and there are poor old people who are cutting down on spending to build up savings, even though they are officially above the retirement age. This leads to a savings glut which is something you cannot fix by adding even more money into asset markets.