> Lower profits = less money to go around to workers
Hasn't this shown to have been un-true in the last 5 years?
Higher profits has not meant more money going around to workers.
Why Falling Prices Are Actually a Really Bad Thing
31–40 of 107 posts
Re: Why Falling Prices Are Actually a Really Bad Thing
#32Earlier quoted context omitted.
>But it can't continue forever... Why not? Malthusian predictions have proven to be wrong so far.
Past performance does not guarantee future results :)
Neither do bald assertions with a smiley face.
We've been supposed to see hyper-inflation Any Day Now since like 2009. I'm sure it's just around the corner.
Re: Why Falling Prices Are Actually a Really Bad Thing
#33> When shoppers see persistent price declines, they hold out on buying things. They ask, will I get a better deal next week, next month, next year?
Who does this? For 90% of my consumer goods, I don't care what they're going to cost in a month or a year. I need to replace the one I have today.
Re: Why Falling Prices Are Actually a Really Bad Thing
#34...in theory.
Re: Why Falling Prices Are Actually a Really Bad Thing
#35OK, this article explains deflationary spiral. This depends on the assumption that people hold out on buying non-urgent goods in the belief that prices will continue to fall - leading prices to fall further. But in the current economic climate, almost nobody is buying non-urgent goods anyway. (Yet we have seen consistent inflation) The current 'deflation' is primarily led by a sharp downtick in oil prices that won't…
> (Yet we have seen consistent inflation) Last month, the US inflation rate was 0.8%. For 2014 as a whole, it was 1.6%. This is, in fact, credited in part to low consumer demand. Slack demand generally leads to job cuts, which leads to even slacker demand. That's the spiral they talk about. > The current 'deflation' is primarily led by a sharp downtick in oil prices that won't be repeated - there's no immediate sugge…
In addition, this incredibly low inflation happened in an environment with rock bottom interest rates and the fed basically printing money because you can't cut interest rates below 0.
Those moves were supposed to create hyper-inflation and be the reason for You to Buy Gold Now. Actually they barely kept us out of deflation.
Re: Why Falling Prices Are Actually a Really Bad Thing
#36This is just stupid IMO, but I'm not any economist. You worked X time: got 1000€ Day 1: You can buy 1000 candies at 1€ each. Day 2: Inflation, prices +100%: you can only buy 500 at 2€ each This means that you just lost 500 candies or 500€. This means that what you worked 50% for nothing! You just lost 50% of your money, just like that! So who has my money? not me of course. Let's think about deflation: Day 1: You can…
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…
What 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.
Re: Why Falling Prices Are Actually a Really Bad Thing
#37Earlier quoted context omitted.
The other reason for so much FUD is that the modern economy is entirely based on debt -- personal, corporate, and (especially) government. Therefore central banks needs to keep the bubble growing perpetually so that the debt can be serviced. But it can't continue forever...
>But it can't continue forever... Why not? Malthusian predictions have proven to be wrong so far.
Historically, debt neither increases forever nor collapses catastrophically. Individual sectors collapse, and new ones develop. In the early modern period, governments would simply refuse to repay their debts. Nowadays we have things like stock market crashes and mortgage crises.
Re: Why Falling Prices Are Actually a Really Bad Thing
#38I would believe these types of pop-economics articles a lot more if they could actually find and example of a deflationary spiral causing a long term depression. Prices for many things already do decrease regularly. Every time I purchase a new computer I'm faced with the knowledge that, in 6 months time, a better, cheaper (or at least better value) model will come out. This myth that consumers will endlessly postpone…
Congratulations for confusing micro and macroeconomics. What happens to the price of a single good over the lifetime of that good is not a useful lesson in what happens as a result of broad, economy-wide deflation. Frankly, the issue with purchase postponement isn't the biggest problem (although it's certainly a concern, as is hoarding). In my mind the biggest problem is wages being inelastic downward. As all prices…
Totally right about downward wage pressure. The worst effect of all of deflation is that it increases the value of debt. So every company and household with debt will see their debt grow in relation to their earning potential. At any level of deflation, suddenly it's a terrible idea to ever borrow any money, which means no new housing, no new factories, no new cars.
Our economy relies on inflation to make it work. A lot of the persistent sluggishness of the current economy is due to the remarkably low inflation, meaning that all the debt people built up prior to the crisis in 2008 is still hanging around and will be for years to come. People are stuck under student loans and underwater mortgages, and unable to invest in their own future. With stagnant wages, digging out from under the debt will take a long time, and until that happens, the economy will continue to trudge along.
Re: Why Falling Prices Are Actually a Really Bad Thing
#39IT industry had falling prices for last 60 years.
Most organizations and individuals are probably spending more than they ever had have on "IT" related purchases.
Re: Why Falling Prices Are Actually a Really Bad Thing
#40"When shoppers see persistent price declines, they hold out on buying things." and yet I keep buying computers... I don't think I agree with this statement (unless there is massive deflation).
Of course not, but that's the fallacy they like to use to convince people that deflation is a bad thing. It's only a problem for those in debt.
They want to inflate away those debts and this goes contrary to that. There's a reason why a Coke no longer costs a nickel and these guys will tell you it's a good thing when it costs a $1000. Never mind that you will essentially be earning the same wages when that comes about. You saw that just a few years ago in CA when oil was close to $150 and people were quitting their jobs because of the cost of the commute.
Bloomberg, like the Economist and FT represent the status quo. They print whatever propaganda they're instructed to by the state. When you hear about the CIA and MI6 having agents working for news organziation, these guys are at the top of the list. Ooooooh 'conspiracy'... that has been documented a thousand times over many decades.
This game has been played out many times before over the past century and then some. It's a tiresome old debate.