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> We have limited data suggesting moderate deflation is any more damaging than moderate inflation You don't need data to understand how people would simply sto

> We have limited data suggesting moderate deflation is any more damaging than moderate inflation You don't need data to understand how people would simply stop working and wait for their cash to appreciate as they do nothing. Except you can't consume or eat cash and also life is short and tomorrow is not guaranteed so when you decide that it's time want to spend it you'd not be better off in any way even after deflationary appreciation because everybody had the same brilliant idea and the huge mass of people stopping working caused a collapse in raw output of products and services. Part of me wishes this actually happens, because those who operate countercyclically and keep working when everybody stops to sit on their couch hoping for deflation to make them rich, would eventually make a fortune when sanity comes back and people realize they can't eat the zeros and ones in their bank account.

JumpCrisscross 4y ago
> don't need data to understand how people would simply stop working and wait for their cash to appreciate as they do nothing You do need data to confirm how these people affect the economy in aggregate. Based on our current evidence, when there is a steep supply curve, deflation is fine [1]. (People hoarding money and delaying consumption and production doesn't change output because (a) there is excess demand and (b) production is constrained by non-price factors.) [1] https://www.nber.org/system/files/working_papers/w10329/w10329.pdf https://www.nber.org/system/files/working_papers/w10329/w103...
- I_DRINK_KOOLAID 4y ago
  > when there is a steep supply curve Where is this excess supply at? Have you seen gas prices? Are you aware that the US had to use oil reserves from the strategic reservoir for the first time in decades? Europe is looking at legal measures to shrink its energy consumption such as regulating thermostats in public offices, schools and universities! OPEC is also using this as an opportunity to shore up its state balance sheets after COVID, they will come through but not before they waste even more time to make sure they milk the West up to the very last politically acceptable petrodollar
  - JumpCrisscross 4y ago
    > Where is this excess supply at? This isn’t what a steep supply curve means. And I wasn’t claiming we are currently in a steep supply curve environment (though we are seeing evidence of it).
  - quickthrowman 4y ago
    > Are you aware that the US had to use oil reserves from the strategic reservoir for the first time in decades? They did not “have to” release oil from the strategic reserve, they chose to.
radford-neal 4y ago
I don't understand your point. You seem to be saying that deflation is bad because if it happens, people will find that they can't buy goods at the price they expect. But that's the definition of inflation. So deflation is bad because it's actually inflation? Or maybe you're saying that any period of deflation will inevitably be followed by a period of inflation, as production collapses due to the deflation? And you also think that people (other than you) won't realize that, and so behave as if the deflation is permanent, causing the problem? It seems to me that as long as the deflation is less than the natural real interest rate (so nominal interest rates are still positive) there is no problem of this sort. It's no more a worry than thinking that anyone with a bit of money in the bank will decide to just live off the interest rather than work. There are such people, but most working-age people either don't have enough money for that, or want to work anyway. The usual argument against deflation involves supposedly "sticky" wages that don't adjust downwards fast enough. Maybe that's the case, but it depends on particular social factors (eg, embarrassment at getting a pay cut).
mistrial9 4y ago
An individual frame of reference is so deeply embedded in opinionated commentary about monetary topics. I find that lazy people argue that everyone is lazy; intelligent people speak as if everyone is intelligent; and selfish people accuse others of being selfish. No one is completely, absolutely any of those things, nor their opposite, yet those are part of the human condition.

JumpCrisscross 4y ago

> don't need data to understand how people would simply stop working and wait for their cash to appreciate as they do nothing You do need data to confirm how these people affect the economy in aggregate. Based on our current evidence, when there is a steep supply curve, deflation is fine [1]. (People hoarding money and delaying consumption and production doesn't change output because (a) there is excess demand and (b) production is constrained by non-price factors.) [1] https://www.nber.org/system/files/working_papers/w10329/w10329.pdf https://www.nber.org/system/files/working_papers/w10329/w103...

I_DRINK_KOOLAID 4y ago
> when there is a steep supply curve Where is this excess supply at? Have you seen gas prices? Are you aware that the US had to use oil reserves from the strategic reservoir for the first time in decades? Europe is looking at legal measures to shrink its energy consumption such as regulating thermostats in public offices, schools and universities! OPEC is also using this as an opportunity to shore up its state balance sheets after COVID, they will come through but not before they waste even more time to make sure they milk the West up to the very last politically acceptable petrodollar
- JumpCrisscross 4y ago
  > Where is this excess supply at? This isn’t what a steep supply curve means. And I wasn’t claiming we are currently in a steep supply curve environment (though we are seeing evidence of it).
- quickthrowman 4y ago
  > Are you aware that the US had to use oil reserves from the strategic reservoir for the first time in decades? They did not “have to” release oil from the strategic reserve, they chose to.

radford-neal 4y ago

I don't understand your point. You seem to be saying that deflation is bad because if it happens, people will find that they can't buy goods at the price they expect. But that's the definition of inflation. So deflation is bad because it's actually inflation? Or maybe you're saying that any period of deflation will inevitably be followed by a period of inflation, as production collapses due to the deflation? And you also think that people (other than you) won't realize that, and so behave as if the deflation is permanent, causing the problem? It seems to me that as long as the deflation is less than the natural real interest rate (so nominal interest rates are still positive) there is no problem of this sort. It's no more a worry than thinking that anyone with a bit of money in the bank will decide to just live off the interest rather than work. There are such people, but most working-age people either don't have enough money for that, or want to work anyway. The usual argument against deflation involves supposedly "sticky" wages that don't adjust downwards fast enough. Maybe that's the case, but it depends on particular social factors (eg, embarrassment at getting a pay cut).

mistrial9 4y ago

An individual frame of reference is so deeply embedded in opinionated commentary about monetary topics. I find that lazy people argue that everyone is lazy; intelligent people speak as if everyone is intelligent; and selfish people accuse others of being selfish. No one is completely, absolutely any of those things, nor their opposite, yet those are part of the human condition.