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Deflation is a good thing
by altertoad 14y ago
Deflation is a good thing
- Glyptodon 14y agoWhy? I'd think you'd generally rather not have all that much inflation or deflation... (Obviously particular parties would have interests to the contrary is specific circumstances, but outside of the short term single party advantage...)
- pbreit 14y agoThe article makes a decent case that it is not. Care to elaborate?
- vrotaru 14y agoPrice deflation or money deflation? Price deflation is a good thing. I'm typing on something which is a "living" proof of these.
- danielweber 14y agoIf a specific good becomes cheaper because the means of production become more efficient, that's awesome. If everything is becoming cheaper because everything is getting more efficient, that's super awesome. If things are getting "cheaper" because the currency is becoming more valuable, that is a disaster. You have society-wide rent-seeking instead of wealth creation.
- vrotaru 14y agoWell, that's exactly my point. In a system with a fixed money supply (all things equal) the only way to have price deflation is to have greater output, greater productivity. Now tell me again, how this is awful? EDIT: As for the rent seeking.. If you hold your money for a while, while the productivity soars, then after a while you can buy more stuff, but only because the stuff has become cheaper. As a fraction of total buying power you are still were you were before. Do you really call it rent-seeking?
- Nursie 14y agoIn a system with a fixed money supply (all things equal) the only way to have price deflation is to have greater output, greater productivity. Uh, what the hell gave you that idea? Another way would be people hoarding cash, making the rest of it more valuable -> deflationary spiral.
- vrotaru 14y agoFirst you have missed the all things equal caveat, second people hoarding cash will not lead to a deflationary spiral, who give that idea? It will lead to a new equilibrium. The greater the cash balances and lower the prices the greater the temptation to spend, and to break the spiral.
- Nursie 14y agoWhy spend when you can buy tomorrow even cheaper? A deflationary currency is not a good idea.
- vrotaru 14y agoa) Time preference (I guess you have a phone, even if..) b) Marginal utility of every extra unit of money decreases when a person holds more of them. Couple that with falling prices and you have the killer of deflationary spiral. A nice theory, though. The deflationary spiral one. But just a theory. Never happened.
- Nursie 14y agoa) That's a downward pressure on sales any way you paint it. b) Obviously this is why the well-off never want any more. You have no concept of history or the problems associated with a gold standard do you?
- vrotaru 14y agoa) Now, that's a different assertion from the original one. (People will stop buying stuff). I'm glad we agree on this one. Ain't gonna happen. b) Are saying the well-off never squander money on stupid things? Is the last sentence some kind of "ad hominem"? Because, it would be a pity.