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The deflation argument is brought up a lot around here, I wonder if you've read this article: http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-deflat

The deflation argument is brought up a lot around here, I wonder if you've read this article: http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-deflation/ http://www.forbes.com/sites/jonmatonis/2012/12/23/fear-not-d... > Contrary to the central banking and political class insistence that deflation must be prevented at all costs, an economy with a monetary unit that increases in value over time provides significant economic benefits such as near zero interest rates and increasing demand through lower prices. Let’s look at some remarks from leading thinkers on deflation.

nhaehnle 14y ago
> increasing demand through lower prices This sounds nice in theory. In practice, prices fall only very slowly, if at all, due to the way that prices are set in practice: Producers decide how much they want to charge, and they are naturally inclined to charge more rather than less. This might be different in a world where the price tags are made by customers, but we have to work with the world we live in. By the way, this is probably the best argument for tolerating a modest rate of inflation (e.g. 5% or so): For "the market" to work well, relative prices need to change to reflect the changing reality of production and consumption. Since the mechanisms of how prices are set allow prices to rise faster than they can fall, it is a good idea for the average price level to be increasing at a modest pace.
lolcraft 14y ago
Indeed, let's look at some remarks from some leading "thinkers" on deflation: > Deflation rewards the prudent saver and punishes the profligate borrower. The way a society, like an individual, becomes wealthy is by producing more than it consumes. - Doug Casey Moralistic pseudo-economical bullshit. Want to know some scandalous borrowers' names? Steve Jobs, Thomas Edison, Warren Buffet, I could go on. The last sentence is so wrong it hurts; a pro-capitalist economist should know very well that, in a market economy, production equals consumption. Shame on him. > Deflation puts a break–at the very least a temporary break–on the further concentration and consolidation of power in the hands of the federal government and in particular in the executive branch. It dampens the growth of the welfare state, if it does not lead to its outright implosion. - Jörg Guido Hülsmann Holy fucking shit Batman, you just did not make the case for deflation based on your pet political fringe worldview. For the record: one, the "executive branch" is not a monolithic entity, and the central bank is quite independent from say, the president; two, what you call "nanny state" is my "minimum decency and human rights state", so thanks for the monetary coup d'etát; three, what about constant, steep deflation favouring by nature the concentration of power into a oligopoly of capitalists. But I guess, since it's a oligopoly of capitalists, it's all OK. > George Selgin rightly distinguishes between malign demand-driven deflation which is an unfortunate secondary effect of a central bank-manipulated, inflationary malinvestment phase and benign deflation which is the result of an increase in productivity. Yeah, dude should also talk about malign deflation that's designed into your currency. Nothing to do with increased productivity, incidentally. One wonders whom these leading thinkers lead, and where... Really, I'm most sympathetic with the notion that lowering prices will increase demand. True, however, we're interested here in the matter of lending and borrowing, which is, in my opinion, very worrying. Of course, I'm not an economist, so I might very well be wrong. However, these gentlemens' arguments do nothing to persuade me.

nhaehnle 14y ago

> increasing demand through lower prices This sounds nice in theory. In practice, prices fall only very slowly, if at all, due to the way that prices are set in practice: Producers decide how much they want to charge, and they are naturally inclined to charge more rather than less. This might be different in a world where the price tags are made by customers, but we have to work with the world we live in. By the way, this is probably the best argument for tolerating a modest rate of inflation (e.g. 5% or so): For "the market" to work well, relative prices need to change to reflect the changing reality of production and consumption. Since the mechanisms of how prices are set allow prices to rise faster than they can fall, it is a good idea for the average price level to be increasing at a modest pace.

lolcraft 14y ago

Indeed, let's look at some remarks from some leading "thinkers" on deflation: > Deflation rewards the prudent saver and punishes the profligate borrower. The way a society, like an individual, becomes wealthy is by producing more than it consumes. - Doug Casey Moralistic pseudo-economical bullshit. Want to know some scandalous borrowers' names? Steve Jobs, Thomas Edison, Warren Buffet, I could go on. The last sentence is so wrong it hurts; a pro-capitalist economist should know very well that, in a market economy, production equals consumption. Shame on him. > Deflation puts a break–at the very least a temporary break–on the further concentration and consolidation of power in the hands of the federal government and in particular in the executive branch. It dampens the growth of the welfare state, if it does not lead to its outright implosion. - Jörg Guido Hülsmann Holy fucking shit Batman, you just did not make the case for deflation based on your pet political fringe worldview. For the record: one, the "executive branch" is not a monolithic entity, and the central bank is quite independent from say, the president; two, what you call "nanny state" is my "minimum decency and human rights state", so thanks for the monetary coup d'etát; three, what about constant, steep deflation favouring by nature the concentration of power into a oligopoly of capitalists. But I guess, since it's a oligopoly of capitalists, it's all OK. > George Selgin rightly distinguishes between malign demand-driven deflation which is an unfortunate secondary effect of a central bank-manipulated, inflationary malinvestment phase and benign deflation which is the result of an increase in productivity. Yeah, dude should also talk about malign deflation that's designed into your currency. Nothing to do with increased productivity, incidentally. One wonders whom these leading thinkers lead, and where... Really, I'm most sympathetic with the notion that lowering prices will increase demand. True, however, we're interested here in the matter of lending and borrowing, which is, in my opinion, very worrying. Of course, I'm not an economist, so I might very well be wrong. However, these gentlemens' arguments do nothing to persuade me.