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Not an economist either. But the way I see it (ignoring food and other things you can't live without) Inflation Day 1: you can buy 1000 candies, and you suspec
by BSousa 12y ago
Not an economist either. But the way I see it (ignoring food and other things you can't live without)
Inflation
Day 1: you can buy 1000 candies, and you suspect tomorrow you will only be able to buy 500, so you buy 1000 candies and store them/eat them. You 'inject' money into the economy, give the government tax money, etc.
Deflation:
Day 1: you can buy 1000 candies, but suspect that tomorrow you can buy 2000 candies, you don't buy
Day 2: you can buy 2000 candies, but suspect that tomorrow you can buy 3000, you don't buy, or buy just enough for your sweet tooth today (lets say 100)
Day 3: you can buy 3000 candies, but again... etc etc
Again, this is based on needs and wants. If you have 1000 euros. If your phone breaks and you need one to work, you will buy today, no matter if we are in deflation or inflation, but if your old one still works, you may very well buy it today (in case of inflation, since it will will cost more of those 1000 euros tomorrow, or you will wait if you are in deflation since it will cost less of those 1000 euros.
Of course, if you need rice to not starve, it doesn't matter! And for average folks, deflation tends to be good since most of expenses are from needs and not wants but this causes issues to business and (possibly) to the economy as well.
If you want a smaller example, I've personally waited for weeks and months to import some goods due to the falling EUR->USD rate, saving me between 5-6% of the cost, so I don't see why others won't do the same if they expect the costs to be less in the future.
- facepalm 12y agoWhat if you really want some candy? I think that's what the theory misses. You can only hold out for so long with certain things. If you are hungry, eventually you'll have to buy something to eat. An extreme example: I have bought a lot of computers in my life, even though I knew their value would be close to zero within two years. And maybe there are also benefits if people only buy the stuff they actually need.
- mikeash 12y agoWhat qualifies as "really need," and how much of the modern economy is involved in producing that stuff? If people only buy the stuff they actually need, we on HN would all be out of jobs tomorrow. Computers, smartphones, nice cars, high-end food, good booze, entertaining movies, all of this goes away. I don't want to live in that world, personally.
- facepalm 12y agoSo you need those things, an ongoing deflation is only a factor in your evaluation. It doesn't mean you'll never buy them. You will think "is it worth for me to hold out a little longer before buying" and there will be a threshold where you think "no" and you buy. You could just as well argue that inflation leads to a spiral of death because people won't be able to afford things. Therefore they won't buy things, nobody will produce things, and there will be no things. Sounds just as logical.
- mikeash 12y agoI'm sorry, I have no idea how your reply relates to my comment.
- facepalm 12y agoWell "really need" is in the eye of the beholder. Except for staying alive. Do you honestly believe because of Deflation people would only buy the barest minimum of things to keep them alive? And when would you buy a sleeping bag. Maybe it is Minus 5 degrees outside but you can survive that. After all, tomorrow the sleeping back will be 1$ less tomorrow, and after all you'll only die if it's minus 10 degrees?
- mikeash 12y agoI'm not talking about deflation. I'm just addressing your idea that "maybe there are also benefits if people only buy the stuff they actually need." I don't think that this would be a good thing at all. I make no comment about what might cause this to happen, only that it's not a desirable outcome.
- facepalm 12y agoOnly because you choose to interpret "stuff you actually need" in a nitpicking, negative way. You are not trying to understand my point. You said you need certain things like computers. So where is the problem?