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When you spend money on some good or service it is because you expect to receive some benefit from the use of that good or service, and you value more that bene
by magoghm 14y ago
When you spend money on some good or service it is because you expect to receive some benefit from the use of that good or service, and you value more that benefit than the money you spent on it. If you delay buying some good or service, because you expect it to become cheaper later on, then you are also depriving yourself of the benefit you expect from it. So, in a deflationary environment, you'll only delay buying something if you think that the money that you save is worth more than what you're losing from not enjoying the benefits of that product for that amount of time.
You need to eat to stay alive, and staying alive is more important to you than saving money, so food purchases won't be delayed very long. You don't need to play video games to stay alive, so you can wait for a couple of years to buy a video game when it becomes cheaper; some people do it to save money while other people decide that they prefer to pay more and be able to play that new video game right away (some even pay a premium if it is sold out, even though they know they could pay regular price by waiting a few days).
- psionski 14y agoPlus, since my money is constantly increasing in value, I can buy something "useless" every month and still have the same amount of money. Inflationary money I stick in deposits so I loose a little less than usual, deflationary - I spend.
- ckrailo 14y agoI think you got the idea confused and/or backwards. You don't have to buy useless things in a deflationary economy. By not spending, you have more buying power for when you do decide to spend (holding all other variables constant, which isn't real-world truth). Thus, inaction is more profitable than "useless" actions/goods/services. In an inflationary economy, you stick money into deposits (instead of under your mattress) because you lose less that way. These deposits are used by banks to fund loans. These deposits probably guarantee a very low but fixed interest rate (such as 0.1%), which makes a tiny dent in how much you lose due to inflation. They also make the bank lots of profit when they do well and are insured against you losing any money (except by inflation, of course) as long as your deposits total <$100k.
- psionski 14y agoI decide to spend right now (by donating, buying domain names, etc.) because I know I'll get it back relatively soon. The numbers in my account don't help me in any way; they don't make my life better. Why should I not spend? Oh, and I don't care about profitability directly - I care about living a happy life. P.S. The deposit interest rates are around 5.5% actually.