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Deflation increases the value of holding cash. By definition deflation occurs when the price of a basket of goods decreases. Why invest your money in a basket o
by pg_bot 14y ago
Deflation increases the value of holding cash. By definition deflation occurs when the price of a basket of goods decreases. Why invest your money in a basket of goods today when it is going to be cheaper to buy that same basket tomorrow?
- adventured 14y agoNope, by definition deflation occurs when the authority controlling the money supply (eg the Fed) contracts said money supply. Prices going down is merely a symptom of deflation, but it is not deflation.
- Locke1689 14y agoOnly the Austrians use that definition and they're not a serious school of economics.
- fnordfnordfnord 14y ago"Austrians" are quite serious. Few people take them seriously.
- solistice 14y agoAnd python is not a serious language. Java is.
- millstone 14y agoWhy is this definition good? I mean, why should I or anyone care about changes in the money supply, except in how they affect prices?
- Evbn 14y agoIt separates (theoretically, as it can't be measured) the price change due to faith-in-currency from price change due to market forces on the products. That is, the price of good may fluctuate as function of how much current labor you need to buy it, or as a function of how much of your past savings it will cost. The diference between those measurements is due to money supply (in part, for there are other complicating factors)
- baddox 14y agoWhy buy a smartphone when next year's smartphone will be better in every way?
- scott_karana 14y agoDeflation would refer to the value of the same good. Obviously new smartphones are pitched as "new, improved" goods, and marketing sways consumers to get the latest and greatest. Not so for staples.
- rmc 14y agoBecause today (and every day between now and next year) you can use that smartphone to do things that you can't do without a smartphone. So yes, the smartphone has lost money value, but you as a person and in your life, have gained. Not so with bitcoin.
- baddox 14y agoUnless, you know, you actually want bitcoin. Maybe you want to buy something now with bitcoin (especially something that's more difficult to buy with government currency, like online gambling or illegal drugs), or maybe you just think bitcoin is cool.
- Symmetry 14y agoBecause you want to use your smartphone. Smartphones are a horrible investment and you really shouldn't buy one if you're planning on storing it in the basement in its original packaging.
- Evbn 14y agoEventually, those suppliers of unwanted goods will stop supplying, and prices will start to rise as demand drops, reversing the deflation.
- millstone 14y agoWhy should prices rise when demand drops? Decreased demand yields lower prices.