5 ms·
Yeah man, super true! For example if prices were to start falling I'm going to start putting off the following purchases: 1. New computer 2. New TV 3. Ne
by msandford 12y ago
Yeah man, super true!
For example if prices were to start falling I'm going to start putting off the following purchases:
1. New computer
2. New TV
3. New stereo
4. Toilet paper
5. Food
6. Gasoline
7. Rent
8. A new-to-me used pickup truck
9. Clothing
10. Several dozen other things which I can't really wait for but which I will pretend I could for the sake of making a point
EDIT: Yes guys, I do realize that it's a marginal effect and that people aren't going to STOP buying TP. The point I'm trying to make, though, is that the "deflationary spiral" told as a story isn't entirely accurate either. People don't STOP buying things, they simply reduce their consumption ever-so-slightly and if EVERYONE does that, it cuts growth.
My point, though, is that there are a whole bunch of things which aren't really elastic or which already have falling prices but don't cause general malaise. Yes TV purchases do get put off for the next best model, but eventually people do buy TVs and the industry has models that work even given this reality.
In my personal opinion it's not that deflation itself is bad it's that it takes a long time for the deflation to work through the economy and for expectations to readjust. And given the maniacally long maturity of mortgages it takes half a lifetime to reset expectations and it's simply unrealistic.
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- Amezarak 12y agoSomething tells me the average HN commenter living in Silicon Valley making six figures doesn't represent the average American. While there are certainly fixed costs to being alive (like toilet paper), most people do cut back and this behavior is observed. And when it gets very bad, even those "fixed costs" start being cut - cheaper toilet paper, moving in with mom and dad, etc. Not because they want to save now to buy more TP later, but because when discretionary spending falls, people lose jobs, which further reduces discretionary spending, and more people lose jobs, wages fall (because of the surplus of labor), and eventually it all starts affecting you.
- icebraining 12y agoWhile there are certainly fixed costs to being alive (like toilet paper), most people do cut back But why, if things are getting cheaper?
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- Retric 12y agoIt's not cheaper right now, it will be cheaper tomorrow. EX: http://buyersguide.macrumors.com/ http://buyersguide.macrumors.com/ note the 'don't buy' recommendations.
- icebraining 12y agoYes, but Amezarak said it was "not because they want to save now to buy more TP later", which is what you're describing.
- Retric 12y agoThe gap between getting a new phone every 18 months vs 2 years is fewer purchases over the long term. (~1 fewer phones every 8 years.) The same thing works for durable goods not just improving goods like PC's. Consider if you wait 1 month when buying a chair it's 1 month newer so you’re likely to wait an extra month before replacing it. Multiplied by 100 million a people and even just 1 month becomes significantly lower consumption. 'This' starts a vicious cycle where fewer durable goods are produced so make fewer goods and thus have less money which reduces consumption of durable goods and non-durable goods. Using the TP example if your broke you can slightly cut back on TP use.
- Amezarak 12y agoBecause by the time people are looking at cutting TP costs, it's because their household income is down probably substantially, or they're afraid it will be in the near future.
- maxerickson 12y agoIt's a marginal effect. The point isn't that you as an individual are going to put off buying all those things, the point is that buyers in aggregate will put off buying those things (or perhaps, immediately shift to a new, lower price that they are willing to pay for them).
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