Viewing a single comment thread. View all comments

Wizard01475 t1_iznn1ku wrote

Reply to comment by MasterFubar in [OC] Inflation heatmap for 44 European, other DM and EM countries by adebar

Zero inflation is neutral (not bad or good) but also hard to walk that line. Deflation (which is bad) is almost inevitable as production becomes more efficient. If you don’t have some inflation there’s no incentive to spend. That incentive is necessary for a consumer driven economy.

15

MasterFubar t1_iznoex7 wrote

> If you don’t have some inflation there’s no incentive to spend.

You're confusing speculation with spending. The logic consumers use is the opposite of the logic speculators use.

Consumers don't buy something expecting the price to rise. Lower prices mean something we wanted to buy but couldn't afford is now within range. Look at all electronic devices. Are you saying nobody will buy a smart phone because prices will be lower next year?

4

Wizard01475 t1_iznqo3c wrote

That’s exactly what I’m saying. Necessities and basic staples aside. Why do people rush to buy things if they think the price is going up? Why would anyone buy anything if they think they can get it cheaper tomorrow.

12

MasterFubar t1_iznseei wrote

> Why would anyone buy anything if they think they can get it cheaper tomorrow.

Because they are consumers, not speculators.

If the price goes down, anything looks like a bargain. You see many ads saying "Now 10% off!", lower prices are always a great incentive for buying stuff. An economy with a steady deflation would have a market with continuous discounted prices.

What most people, including many economists, don't understand is that deflation is a result of economic depression. Sellers offer lower prices because they are stuck with a warehouse full of unsold items. There is a correlation between deflation and recession, but deflation is not the cause, it's an effect of recession.

2

Wizard01475 t1_iznt8oa wrote

This is true for things like food and energy. But not for durable goods, luxury items, or things like houses and cars.

11