Did you read my post at all? Did you read the part where I stated that it wouldn't matter for necessary items like food? I think I was mainly talking about a shorter time than your 5 years as well... If you can hold off buying something that's would last a longer time like 5 or 10 years and the value is more significant than a hundred bucks... you would definitely wait longer to buy it when it's in constant deflation. Of course deflation doesn't end economy, economy is basically a depiction of the workings of a certain social group, whether it's a company, or a country.... economy doesn't 'end'... there will always be an economy. But an enduring deflation together with a stagnating economy will be severely affecting social workings and therefore 'the economy' in a very bad way. If it's a growing economy it's not so much a problem, like in your example of the computer/chip markets. The stagnating bit will mean joblessness, underpayments, etcetcetc... I seriously doubt that you can debunk that line of thought...
As far as I can tell, the key to the anti-deflation argument is that people will delay purchasing because the dollar will be worth more later, therefore will represent a better value proposition vs purchasing now. I believe this is pretty clearly false -- and not just for necessities (I did list non-necessities btw). With a constant deflation, there will always be a better value by waiting, so if it were true that people wouldn't spend now, they would delay for X amount of time, but in X amount of time, they could wait an additional X amount of time to get an even better value. Followed to its logical conclusion, people would never spend on non-necessities. The entire idea of this just seems so silly to me because it seems so obviously false just based on human behavior we see right now. If this argument were true, then people would always be looking to optimize the ROI of their purchases without respect to how quickly they can acquire their goods or services that they pay for. So why is it then that people: *) pay a premium for faster shipping *) buy almost any form of technology *) buy new release movies (yes, I realize this is a bit dated) vs waiting for that same movie to be cheaper *) not wait for sales of items that they know will be on sale in the future *) buy pretty much anything -- not just technology, but anything that's going to have a better version available later. This applies to damn near anything from phones to cars, televisions, etc. Many items are becoming better and at the same or lower price point despite inflation, which should actually have the opposite effect. *) buy anything at all on credit (and pay a finance charge) that is not a necessity -- ie buying a tv, furniture, any non-necessity on credit The fact is, people have a desire for instant gratification. People want things. If they didn't, they'd have no need to work for more than what is required to cover their basic necessities. The fact that people work more and buy more is enough evidence that people want things. To say they will delay purchases indefinitely (ie never purchase) is something I just can't wrap my head around. People want things and that wouldn't stop because people don't want to wait for eternity to make those purchases. The anti-deflation argument in its simplest form is that deflation will cause people to delay purchases indefinitely to effectively save some X deflationary amount (say 2.5% as an example since that's roughly inflation). What specific markets do you think would be negatively impacted by deflation? Since the pro-inflation people make it sound like the economy would literally collapse if there was deflation, what specific markets would be decimated by their product being 2.5% better for the money in 1 years time? I'm sure there's something, but it's not something I've put any real thought in to because like I said, if the anti-deflation argument boils down to "people will never purchase non-necessities", well that's just something I don't think merits being taken seriously. Of course I'm ignoring hyper-deflation as that would be a bit different. I'm making these statements with the assumption of a small, but steady deflation at about the rate we have inflation.
It's not that people will postpone purchases indefinitely, but merely make do longer. For instance, you have a nice car... 3 years old... not too many miles on it. You start looking at a replacement, a new car... Off course there are some people always wanting the newest, but it makes sense to keep that old car for another 3 years... or 5 or whatever and then buy a new one when it's really necessary to replace it. The argument for buying now vs waiting surely surely takes deflation into account when it really matters. Housing market will be severely affected as well, as we saw during GFC... people just stop buying, on of the reasons being that the prices keep dropping. It works the other way around as well, housing bubbles are created when it's only going up... you might not need that big house yet, but you might as well buy it now because you will need it when you have 3 kids in 6 years time... it's going up anyway! Just because many people at the moment always want the newest crap, doesn't mean they are actually making a sound economical choice. When deflation hits in a prolonged way, I seriously doubt people will not think it through a bit more.... I know I'm an optimist, somewhere I hope people actually think before they buy. Also, when there's deflation for the next 10-20 years... think about what would happen to financial markets. Stocks and their values are based on future income/cashflow. If there's long dated deflation, cashflows drop... earnings drop... stocks drop... interest rates drop, but to no effect on to the state of the economy.... companies will tighten the spending, wages drop... etc etc etc... US gov can't possibly ever repay their debts in a normal way, so USD devalues massively... that's financial mayhem... I might be wrong on some points, but this scenario is definitely more than just a possibility. How do you think that would filter through?
Clear your mind and cut through the fertilizer. Say I had a printing press and it would be legal to print money for myself. Do I try to convince you that deflation or that inflation is good for you?
You're right... thread wasn't about pro/cons. Back to initial question... Do Central Banks create inflation or not? Probably, increasing the money supply tends to increase spending and therefore upward price pressure... but you can also look at it another way. If there's a constant upward price pressure/inflation, then eventually the public needs more money supply just an increase in speed/rotation wouldn't cut it. So increase in supply is a reaction to inflation as well....
Central Banks are just the PR department of the cartel. They communicate the decisions but the amount of actual money they create is minuscule compared to what commercial banks create. You can say that today the banks are the true sovereigns. I believe a few centuries from now we will look back at this private outsourcing of money the same way we look today at the lords right to bed any bride on their land on their wedding night.
I don't care too much about the inflation of "common items" that I buy every day which are small expenditures. However, for myself (and probably most folks), the "big-ticket" spending items in your budget are likely: 1) Housing 2) Taxes 3) Transportation/Energy and possibly 4) Health insurance/care (depending on where you live and your current situation.) The inflation of the "big ticket" items (taxes especially) completely trounces the fact that now when I buy a dozen eggs it costs $1.29 instead of $1.19.
Inflation of taxes... how does that work? Where are you from, the US? They have a very low tax system compared to other western countries. The rest I can understand, since they are all related to inflation in the normal sense.
Yes, in the US. Specifically, in Illinois. A couple examples: Property tax increased 60% from 2015 to 2016. Then increased again 10% on top of that from 2016 to 2017. State income tax just increased 33% this year over last year. Taxes are the largest budget item for me. I spend more on taxes per year than any other spending category. Perhaps "inflation" isn't the right term. Inflation is more of a description of a money supply, technically. But I was using it more in the "common" sense, of the "amount that xyz costs me each year."
You mean the tax % rate went up? Purchase tax or for holding? From how much to how much? Total tax is still very low in the US... I think you're looking at it from the glass half empty perspective...