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> when real estate prices have dropped by more than 50% in tier 2 and below cities, and deflation has raged on. Can other economies copy that part? I know a bu

by roenxi 2y ago

> when real estate prices have dropped by more than 50% in tier 2 and below cities, and deflation has raged on. Can other economies copy that part? I know a bunch of people who'd like to be able to afford more houses & more groceries at the same time. I'd like that, I can't realistically afford a house in the city I live in without a 50% price drop. I'm sure China has a lot of problems, but key goods getting cheaper is not one of them. What I'm guessing you meant to say is that retirees were led to put too much of their savings into the housing market and are discovering there is a glut. Which is tragic for them. But prices dropping is a good thing; the unachievable ideal is a utopia where everything is free, ie, 100% deflation.

kayewiggin 2y ago
China's real estate prices having dropped 50% or more has been accompanied by/caused by wages being slashed 50% or more, and increasing unemployment rate, such as 30%+ for youth. Here are some good posts on why nobody wants deflation: https://www.reddit.com/r/AskEconomics/comments/uzq5bu/why_is_deflation_regarded_as_a_bad_thing/ https://www.reddit.com/r/AskEconomics/comments/uzq5bu/why_is... https://www.reddit.com/r/AskEconomics/comments/mbsxyl/can_someone_explain_to_me_why_deflation_would_be/ https://www.reddit.com/r/AskEconomics/comments/mbsxyl/can_so... https://www.reddit.com/r/AskEconomics/comments/yotf0c/i_dont_see_how_deflation_if_bad/ https://www.reddit.com/r/AskEconomics/comments/yotf0c/i_dont... also coincidentally and recently, China’s Xi Jinping asked ‘What’s so bad about deflation?’ amid economic slowdown https://fortune.com/2024/12/29/china-economy-deflation-xi-jinping-growth-slump-consumer-producer-prices/ https://fortune.com/2024/12/29/china-economy-deflation-xi-ji...
- roenxi 2y ago
  So some might suggest that the problem is wages being slashed by >50%? Falling real wages are actually a problem. And, AFAIK by definition, are not influenced by inflation or deflation. But if wages had fallen by <40% and prices by >50% then the overall situation was probably improving. A bit chaotic to be comfortable, but not fundamentally worse. And there is an unemployment problem too, obviously.
- suraci 2y ago
  Your reference is a bs 'CCP is a secret and authoritarian regime that wields immense power' vs 'Some random reporter with English firstname and Chinese lastname know what Xi said before he go to bed' Have you ever wondered if there's a tiny possibility that the media and the reporter *might* be lying? ...
  - rangestransform 2y ago
    It’s definitely less rule by committee than the Hu administration, and even the Xi administration pre-deposing Li Keqiang
robgibbons 2y ago
It's commonly referred to as a deflationary spiral because the falling prices lead to people (perhaps counterintuitively) holding off from large purchases, anticipating a continued drop in prices. Sort of a "buy the bottom" mentality. The lack of spending then further contributes to falling prices, job cuts, businesses closing, etc. It's really not a situation any economy _wants_. That said, I empathize with your sentiment.
- churchill 2y ago
  I have never understood the concept of the deflationary spiral: no matter how much people want to save their cash for later, there are simply things they can't do without. Food, energy, transportation, education, etc. How long are you going to delay getting a new car simply because cars are getting cheaper and better? Once you probe the theory beyond the surface, it collapses. Yes, a deflationary economy will see less cash velocity than a ZIRP economy with cheap cash sloshing around. But, at the end of the day, humans MUST spend resources today to live to see their savings worth more.
  - jarsin 2y ago
    You're missing the debt equation. We live in debt based economy. True across the board deflation (not just some things get cheaper cause of tech etc) means debt is harder and harder to service as wages and earnings fall. As the asset backing the debt goes underwater the debt holders have no choice but to walk away. All banks stop lending and ultimately the entire economy grinds to a halt. That's the main cause of the spiral. One man's debt is another mans income. The reason we narrowly avoided full blown deflation in 2008 is because they bailed out the banks. If they didn't we would have had 1929 style depression these last 15 years.
- roenxi 2y ago
  That is obviously wrong to the point where I am confused why someone always makes the claim. I'm looking forward to running in to someone who can actually follow up with some sort of defence of the position. Extraordinary claims, extraordinary evidence style. Consider the computer industry. Prices have been falling pretty much across my entire life. Supply-demand suggests that people will keep buying new computers as the price drops and that is exactly what is happening. Demand for compute has never been higher. There is no waiting for improvements, if anything there is a mad rush to buy hardware that everyone knows is about to be obsoleted. It isn't even an irrational rush, the people buying that obsolete hardware often make good money (eg, bitcoin miners in the heyday). Basic supply demand says as price drops demand increases. Basic life experience says as prices drop I can afford more and better stuff. Observation of real industries suggests - as we would intuit - that industries with regular price drops are actually healthy and great to be in for consumers in the small and the large. Theory suggests that everyone ignores nominal price fluctuations and focuses on real changes so systemic deflation is irrelevant. None of this supports the idea that deflation is bad. Pretty sure the anti-deflation crowd are just wrong. They have no evidence or argument [0] as far as I can tell, and all the theory is stacked against them. China surely has problems. Deflation is not a problem. It is just a metric. [0] EDIT Well I suppose they do have an argument, but it involves people randomly going crazy and choosing to live in poverty and discomfort because it gets easier to buy goods. Which is not an argument I really take seriously.
victorbjorklund 2y ago
Much of real estate in china is not liveable. They are cheaply built projects without any infrastructure or people living in it.
- kayewiggin 2y ago
  here's a video of a Chinese family living on the 16th floor of a rotten tail building (unfinished building) with no running water or electricity. https://www.youtube.com/watch?v=ZjaE8mDbq68 https://www.youtube.com/watch?v=ZjaE8mDbq68
csomar 2y ago
I think peak propaganda and manipulation was convincing people that inflation is good for the economy and therefore for them. Imagine prices constantly dropping and your money buys more than ever, uhm, like the deflation happening in tech. That would be very bad for the economy. The irony is that the best performing sector has been the one deflating the most.

by roenxi 2y ago

kayewiggin 2y ago

China's real estate prices having dropped 50% or more has been accompanied by/caused by wages being slashed 50% or more, and increasing unemployment rate, such as 30%+ for youth. Here are some good posts on why nobody wants deflation: https://www.reddit.com/r/AskEconomics/comments/uzq5bu/why_is_deflation_regarded_as_a_bad_thing/ https://www.reddit.com/r/AskEconomics/comments/uzq5bu/why_is... https://www.reddit.com/r/AskEconomics/comments/mbsxyl/can_someone_explain_to_me_why_deflation_would_be/ https://www.reddit.com/r/AskEconomics/comments/mbsxyl/can_so... https://www.reddit.com/r/AskEconomics/comments/yotf0c/i_dont_see_how_deflation_if_bad/ https://www.reddit.com/r/AskEconomics/comments/yotf0c/i_dont... also coincidentally and recently, China’s Xi Jinping asked ‘What’s so bad about deflation?’ amid economic slowdown https://fortune.com/2024/12/29/china-economy-deflation-xi-jinping-growth-slump-consumer-producer-prices/ https://fortune.com/2024/12/29/china-economy-deflation-xi-ji...

roenxi 2y ago
So some might suggest that the problem is wages being slashed by >50%? Falling real wages are actually a problem. And, AFAIK by definition, are not influenced by inflation or deflation. But if wages had fallen by <40% and prices by >50% then the overall situation was probably improving. A bit chaotic to be comfortable, but not fundamentally worse. And there is an unemployment problem too, obviously.
suraci 2y ago
Your reference is a bs 'CCP is a secret and authoritarian regime that wields immense power' vs 'Some random reporter with English firstname and Chinese lastname know what Xi said before he go to bed' Have you ever wondered if there's a tiny possibility that the media and the reporter *might* be lying? ...
- rangestransform 2y ago
  It’s definitely less rule by committee than the Hu administration, and even the Xi administration pre-deposing Li Keqiang

robgibbons 2y ago

It's commonly referred to as a deflationary spiral because the falling prices lead to people (perhaps counterintuitively) holding off from large purchases, anticipating a continued drop in prices. Sort of a "buy the bottom" mentality. The lack of spending then further contributes to falling prices, job cuts, businesses closing, etc. It's really not a situation any economy _wants_. That said, I empathize with your sentiment.

churchill 2y ago
I have never understood the concept of the deflationary spiral: no matter how much people want to save their cash for later, there are simply things they can't do without. Food, energy, transportation, education, etc. How long are you going to delay getting a new car simply because cars are getting cheaper and better? Once you probe the theory beyond the surface, it collapses. Yes, a deflationary economy will see less cash velocity than a ZIRP economy with cheap cash sloshing around. But, at the end of the day, humans MUST spend resources today to live to see their savings worth more.
- jarsin 2y ago
  You're missing the debt equation. We live in debt based economy. True across the board deflation (not just some things get cheaper cause of tech etc) means debt is harder and harder to service as wages and earnings fall. As the asset backing the debt goes underwater the debt holders have no choice but to walk away. All banks stop lending and ultimately the entire economy grinds to a halt. That's the main cause of the spiral. One man's debt is another mans income. The reason we narrowly avoided full blown deflation in 2008 is because they bailed out the banks. If they didn't we would have had 1929 style depression these last 15 years.
roenxi 2y ago
That is obviously wrong to the point where I am confused why someone always makes the claim. I'm looking forward to running in to someone who can actually follow up with some sort of defence of the position. Extraordinary claims, extraordinary evidence style. Consider the computer industry. Prices have been falling pretty much across my entire life. Supply-demand suggests that people will keep buying new computers as the price drops and that is exactly what is happening. Demand for compute has never been higher. There is no waiting for improvements, if anything there is a mad rush to buy hardware that everyone knows is about to be obsoleted. It isn't even an irrational rush, the people buying that obsolete hardware often make good money (eg, bitcoin miners in the heyday). Basic supply demand says as price drops demand increases. Basic life experience says as prices drop I can afford more and better stuff. Observation of real industries suggests - as we would intuit - that industries with regular price drops are actually healthy and great to be in for consumers in the small and the large. Theory suggests that everyone ignores nominal price fluctuations and focuses on real changes so systemic deflation is irrelevant. None of this supports the idea that deflation is bad. Pretty sure the anti-deflation crowd are just wrong. They have no evidence or argument [0] as far as I can tell, and all the theory is stacked against them. China surely has problems. Deflation is not a problem. It is just a metric. [0] EDIT Well I suppose they do have an argument, but it involves people randomly going crazy and choosing to live in poverty and discomfort because it gets easier to buy goods. Which is not an argument I really take seriously.

victorbjorklund 2y ago

Much of real estate in china is not liveable. They are cheaply built projects without any infrastructure or people living in it.

kayewiggin 2y ago
here's a video of a Chinese family living on the 16th floor of a rotten tail building (unfinished building) with no running water or electricity. https://www.youtube.com/watch?v=ZjaE8mDbq68 https://www.youtube.com/watch?v=ZjaE8mDbq68

csomar 2y ago

I think peak propaganda and manipulation was convincing people that inflation is good for the economy and therefore for them. Imagine prices constantly dropping and your money buys more than ever, uhm, like the deflation happening in tech. That would be very bad for the economy. The irony is that the best performing sector has been the one deflating the most.