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Well, silver lining is that seems like a really strong signal that we're heading towards disinflation.
by tootie 4y ago
Well, silver lining is that seems like a really strong signal that we're heading towards disinflation.
- AnimalMuppet 4y agoNo, it's a signal that we're heading for lower demand, at least partly because of inflation.
- jeromegv 4y agoThe point is this might stop inflation in its track.
- somenameforme 4y agoI am not saying that this is the scenario but it's worth considering that the start of economic collapse from inflation tends to happen when companies have products to sell, but they can't afford to sell them for prices that people can afford to pay. This does not end inflation, but tends to exasperate it. The company goes out of business and you now have fewer things in the economy, but the same amount of money. The result is further inflation.
- SoftTalker 4y agoBut Target is likely not going out of business. Even if they have to sell stuff at a loss. And even if they did, their inventory would be auctioned off and resold, it would not just be chucked in a landfill.
- somenameforme 4y agoI agree that they are probably not going out of business, though it may be closer than it seems. The article suggests they're now going to be running on a 2% margin after the clearance. Even if things get worse, they can probably afford to run in the red for some significant period of time (and perform various liquidations to get back into the black if necessary), but that's a quite unstable scenario. The issue with a retailer going out of business is not the retailer itself, but the manufacturers behind it. Target failing to sell their product reflects large numbers of manufacturers being unable to sell their product.
- SV_BubbleTime 4y agoWhich is counter intuitive. If your money is going to worth less soon, you should probably spend it. This is the idea behind why “gentle inflation is good”. I’m looking at expensive hard good rights now. Purchases that I’ve been putting off for awhile because I know those prices are going up soon.
- SoftTalker 4y agoHowever if your money is going to be worth less soon, you might be inclined to avoid all non-essential purchases so you have more money left for stuff you need (food, rent, gas).
- tootie 4y agoI mean, it's literally lower prices which means lower CPI. You can make an academic debate over whether that's technically disinflation, but the BLS report is going to post a lower number.
- dwater 4y agoNo, it means lower prices on the limited number of goods which were oversupplied that nobody wants right now. It doesn't mean lower prices on the stuff everyone is still buying like food and gas.
- whimsicalism 4y agoYou've got cause and effect backwards.
- AnimalMuppet 4y agoI'm saying that higher inflation causes lower demand. Are you saying that lower demand causes higher inflation? If so, can you explain how you think that cause-and-effect works?
- whimsicalism 4y agoLower demand causes lower inflation, lower demand is indicative of Fed tightening. Higher inflation often goes hand in hand with higher demand. Don't reason from a price change.