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Deflation is natural due to increasing uses of new technology which make products and services cheaper and better. Deflation, purchasing power increase, is goo

Deflation is natural due to increasing uses of new technology which make products and services cheaper and better. Deflation, purchasing power increase, is good for savers. Those gorged on debt like to "fight deflation" because inflation makes their debts cheaper to pay. The "deflation is bad" cheering squad is talking their book of over-levered speculation.

imtringued 5y ago
People considered deflation bad enough to fight two world wars. After all, deflation makes a lot of people redundant since the wealthy don't want to share. For example, Germany wants to produce every product on the planet and everyone to world in Germany. The idea of letting the Greek work in Greece is an abhorrent idea to most Germans. Germans want to save as an end itself. They sell products and services to Greece without ever buying anything from Greece. This is bound to collapse at some point because the Greece debt that is fueling Germany's ecpnomy is unsustainable. Oh wait it did... and the same story is happening with italy, spain, protugal and even more african countries. All those countries ought to not exist because Germany is running the show right? Who is Germany going tp sell its products once they are gone? Oh right. Nobody. This very same relationship between countries also happens within countries. There are some individuals that are slightly more profitable to hire so they get the whole 40 work week even if they only want to work 25 hours for example. Those 15 hours cannot be worked by a poorer person that actually needs the money. You are now in a paradoxical situation where there is simultaneously too much money and yet not enough to employ everyone. It clearly is an allocative failure. But since the liquidationists see the failure in the existence of properly run businesses, not the fact that they hire and distribute the money to people that don't need it they will simply shut the entire business down. After all, to get rid of the slightly more productive person that is earning more than he intends to spend, you first have to get rid of all the dozens of slightly less productive people first. During a depression, employers will fire those people whose supply and demand actually matches pretty well and ironically they tend to fire those whose supply exceeds their personal demands very late even though that is the origin of any depression. So the liquidationists end up with a very simple conclusion, shut down the business even though it is needed again in a few years, shut it down even though the cost of reopening exceeds the cost of keeping it open. Liquidationism has no proven track record, it has always ended in failure
- landemva 5y ago
  ' People considered deflation bad enough to fight two world wars. ' That is an astounding stretch. Kohl of Germany put Germans into euro scheme without a vote, because a vote on the centralized currency did not have support in Germany. Now the southern countries are trapped whereas before 2000 they had monetary sovereignty.
qeternity 5y ago
> Deflation is natural due to increasing uses of new technology which make products and services cheaper and better. This is not deflation. Prices go up and down. That alone does not imply inflation/deflation. > Deflation, purchasing power increase, is good for savers. The best thing for savers is real returns. History has shown that periods of broad GDP growth with moderate inflation produce the greatest real returns. My comment has nothing to do with me cheering on inflation. I am hearing a lot about Weimar inflation recently, and I’m not sure most people realize that was born from a horrendous deflationary period which resulted in two world wars (as another commenter rightly points out).
- landemva 5y ago
  ' The best thing for savers is real returns. ' Investors want returns. In inflationary environments, savers are compelled to become speculators (or investors) to attempt to protect purchasing power. GDP includes government spending, which has been increasing. How is broad growth in government spending good for savers? I'm not talking about hyperinflation in USA, though it is convenient for your argument to use an extreme example of war reparations.

imtringued 5y ago

People considered deflation bad enough to fight two world wars. After all, deflation makes a lot of people redundant since the wealthy don't want to share. For example, Germany wants to produce every product on the planet and everyone to world in Germany. The idea of letting the Greek work in Greece is an abhorrent idea to most Germans. Germans want to save as an end itself. They sell products and services to Greece without ever buying anything from Greece. This is bound to collapse at some point because the Greece debt that is fueling Germany's ecpnomy is unsustainable. Oh wait it did... and the same story is happening with italy, spain, protugal and even more african countries. All those countries ought to not exist because Germany is running the show right? Who is Germany going tp sell its products once they are gone? Oh right. Nobody. This very same relationship between countries also happens within countries. There are some individuals that are slightly more profitable to hire so they get the whole 40 work week even if they only want to work 25 hours for example. Those 15 hours cannot be worked by a poorer person that actually needs the money. You are now in a paradoxical situation where there is simultaneously too much money and yet not enough to employ everyone. It clearly is an allocative failure. But since the liquidationists see the failure in the existence of properly run businesses, not the fact that they hire and distribute the money to people that don't need it they will simply shut the entire business down. After all, to get rid of the slightly more productive person that is earning more than he intends to spend, you first have to get rid of all the dozens of slightly less productive people first. During a depression, employers will fire those people whose supply and demand actually matches pretty well and ironically they tend to fire those whose supply exceeds their personal demands very late even though that is the origin of any depression. So the liquidationists end up with a very simple conclusion, shut down the business even though it is needed again in a few years, shut it down even though the cost of reopening exceeds the cost of keeping it open. Liquidationism has no proven track record, it has always ended in failure

landemva 5y ago
' People considered deflation bad enough to fight two world wars. ' That is an astounding stretch. Kohl of Germany put Germans into euro scheme without a vote, because a vote on the centralized currency did not have support in Germany. Now the southern countries are trapped whereas before 2000 they had monetary sovereignty.

qeternity 5y ago

> Deflation is natural due to increasing uses of new technology which make products and services cheaper and better. This is not deflation. Prices go up and down. That alone does not imply inflation/deflation. > Deflation, purchasing power increase, is good for savers. The best thing for savers is real returns. History has shown that periods of broad GDP growth with moderate inflation produce the greatest real returns. My comment has nothing to do with me cheering on inflation. I am hearing a lot about Weimar inflation recently, and I’m not sure most people realize that was born from a horrendous deflationary period which resulted in two world wars (as another commenter rightly points out).

landemva 5y ago
' The best thing for savers is real returns. ' Investors want returns. In inflationary environments, savers are compelled to become speculators (or investors) to attempt to protect purchasing power. GDP includes government spending, which has been increasing. How is broad growth in government spending good for savers? I'm not talking about hyperinflation in USA, though it is convenient for your argument to use an extreme example of war reparations.