Why is deflation long term bad for anyone but the financial industry?

>>132275862

Because it encourages people not to spend any money, since every day what they want gets cheaper. This causes the entire economy to halt.

>>132275862

Because in deflation, people will not buy, hoping the prices to fall.
The makers of the product will stop make them, hoping the scarcity will rise prices.

Basically, deflation makes not worthwhile to engage in productive enterprises:

Imagine you buy the ingredients to make a cake at 10€, you make the cake, go sell it, but now the price of the cake is just 4€.

Hope I helped.

>>132275862
new money needs to be created: its just a matter of who gets the new money thats created, how and why

>>132276163
this does not mean "any quantity of increased inflation is good"

Do you believe there can be such thing as too much inflation, hyper inflation, and below?

>>132275862
http://trilema.com/2017/the-universal-plan-for-wealth/

Just buy bitcoin and hold the fuck on. Shit is about to get bumpy.

>>132275992
>>132276163
Then why are people buying electronics?
>>132276191
>new money needs to be created:
What for?

>>132276302
1) Not any quantity of increased inflation is good.

2) Yes. Inflation and deflation should be "natural" phenomenons considering any given economical condition du jour and its pressures. It's excesses are detrimental. As well as its "manipulation" for the lack of a better word.

>>132276405
>>new money needs to be created:
>What for?
The population grows and people save.

Year 10. Population 1,000. Money 10,000
Year 30.
Year 60.
Year 90.
Year 120.
Year 150.
Year 180. Population > 1,000. Money 10,000
...
...
Year 2000. Population 1,000,000. Money 10,000

>>132277282
>any given economical condition du jour and its pressures
That is why I said long term bad
Deflation is just a bubble that will correct itself after everyone that took on excess debt is liquidated

>>132277416
Then it is just worth more
Why is this a problem
If you need smaller denominations you can just add zeros but keep the same value

>>132276405

People buy electronics because its a fad.
Also, they don't buy it all the time so when they do they want the best in the market so that it will last longer being cutting edge.

It is a fad:
I was entertaining the thought of buying a top 5.000€ TV a few years back. At the same time, my grandfather asked me for one cheap 50€ TV.

I didn't buy mine but bought one for my grandfather and he still watches it today.
I still have my old TV way better than my grandfather, way worse than the one I thought of buying and I can still see TV on it.

(I was not buying such an expensive TV for myself, it was me and a bunch of a friends buying it for a common space, it would cost about 200€ or so by person. My TV went there instead and I got enough money to buy a newer TV)

>>132277662
But the industry is health despite prices coming drastically down

>>132277661

You can't have deflation long term. It would destroy any economy.

I figure I do not quiet undertstand what you're talking about or what you want to ask.

>>132275862
deflation would be fine without a debt based financial system

people would still have the incentive to produce for a lesser nominal price, as the purchasing power of the finite dollars in existence would be increasing.

in the absence of a fractional reserve lending system, deflation is literally the measure of progress -- increasing consumer purchasing power as a result of productive gains in the economy at large

>>132277416

That's the biggest bullshit they ever fed you.
Money should be proportional to the availability of goods either produced or in the market.

To create new money because there are new people is ripping of the value of the money of the "old people".
Funny enough, it's kind of what we have today.

Money is shit, its nothing. What really matters is productivity and the ability to produce.

File: Krugman-What-Did-You-Do.jpg (79KB, 683x720px) Image search: [Google]

79KB, 683x720px

>>132275992
>I'm going to buy a car next year even though I need it to drive tomorrow

How about you stop and think before you post?

>>132277924
>You can't have deflation long term.
Yes you could

>>132275862
Long term, very, very low rates of constant deflation, if you could even figure out how to have that happen, theoretically probably wouldn't be bad at all. Goes against conventional mindset though.
Yes, it'd discourage buying and investment to some sort of rate, but people don't want to sit at a standstill. They want to chase the carrot.
The economy wouldn't go to stand still. A man with a $1.00 note in his pocket wants to make more than... .15 in actual purchasing value some X# years in the future. And people have to spend something.
Lenders want to make money. They have huge stacks, and want more. They're going to lend. More conservatively maybe. Good. But they're going to lend in a long term low-deflationary trend.
Yes, deflation can wreck an economy, at percentage rates lower than comparable inflation. Deflation spikes are particularly bad.
However the modern system and economic mindset, where any instance of deflation, Any, ever, ever, Ever, Evereverever, is portrayed as a total crisis that should mean automatic monetization until inflation is happening, is imo fairly bullshit.

>>132276311
>had $250 in btc laying around
>decide to buy a bunch of drugs because why not
>btc is now 5x what it was when I spent it all

Think it'll keep going up? I can't imagine it being any higher than it is right now.

>>132278323
>if you could even figure out how to have that happen
not printing money

>>132277788

That's because you buy things made by slaves in China and Bangladesh.

Also, it is the exact definition of unhealty when you see you cannot produce "competitively" in your own country.

Also, a lot of the industry now is tech shit like google and stuff which is not really industry but services. (Think of the internet of things and I phones).

>>132278255

I can't understand how because if we have deflation hard enough there is no incentive to produce. How the hell can that go on is beyond my ability to grasp.
Please explain it to me.

>>132278473
But my point was it doesn't kill demand

>>132278612
>hard enough there is no incentive to produce.
Because labor and material costs would also come down

>>132278323

You cannot have "classical" deflation for long. I don't understand how you guys can even imagine it!

And deflation is actually quiet dangerous to the current financial system because under deflation, there is a contraction of debt and therefore no new money is created. And the system risks crumbling.

Don't think for a second that a saner financial system (which we desperately need) would involve deflation. We don't seek deflation, we seek stability (which is in my view impossible, but the closer we are to it, the better).

>>132278612
Dude... your examples though. "But but, if $1 is worth 1$ in purchasing power, and the next 15 minutes later it's worth what was previously 50$ in purchasing power, economy BAD!"

Yes. Indeed, yes, economy bad in that instance.
What I mean to say is, the rates of deflation you're portraying and worrying about man. Take a chill pill Krugman. Damn.

>>132278655

What doesn't kill demand? Deflation? Of course it does...
Just tell everybody you will sell whatever 50% off in two days time and see when people will flock to buy it.

I suspect that deflation you talk about is nonexistent because Iphones are getting more expensive, the lower variants are the ones wihich are cheaper but these are no longer top notch, so...

>government wants to give free shit to people
>prints money devaluing its currency
>prices would have been dropping steadily for a century
>citizens would've gotten multiples of what they have for the same money
>government says this is bad

>>132279371
>because Iphones are getting more expensive
no they are not
How much do you think a new iphone 4 goes for now?

>>132279768

But that is not top notch! You can't compare it to the latest one.

I'm going to sleep, take care.

>>132278178
but what when there are 1,000,000 people and only 10,000 dollars, and 100 people have 9,800 dollars?

that leaves 999,900 with only 200 between them?

and what if out of 999,900... 900 of those peope have the 199 between them?

that leaves 999,000 with 1 dollar between them

>>132280437
yes you can
you could have waited for the price to come down and bought it

>>132280475
you can create a new currency with added zeros but keep the same value

>>132276163
Deflation as op well illustrates in his pic in the electronics industry is well known by all but that doesnt really seem to affect them much does it?
>>132275862
It's nothing but good. It's a meme that was originally pushed as a bad thing in the late 19th century because they were told their debt they held would increase in value.

>>132278995
Ok how about this: when there is high inflation (which we should agree is possible (who is to judge)) deflation is good.

i.e. it would be more beneficial for the people with the most amount of money, to have a portion of their money burned, because that would make the money everyone has worth more.

inflation means, more money is created. If everyone has money in the bank they worked hard for, and then a lot more money is created, the money everyone has in the bank is worth less

>>132280974
>It's a meme that was originally pushed as a bad thing in the late 19th century because they were told their debt they held would increase in value.
and all they did creating by creating inflation was give people a reason to take on more debt

>>132280809
explain better.

New currency... added 0's, who gets it? how?

>>132281418
old $1 is now worth new $100

shitty countries do this all of the time in reverse when inflation gets out of control

>>132275862
deflation happens all the time, what do you think raising interest rates is? It is putting a premium on capital, and thus driving the value of it up.

>>132281657
how does that change anything? wouldnt the setters of all the prices just boost up the prices?

Hot dog was 1$ now its 100$

>>132282216
you are not changing the value of the old money so it is not inflation/deflation you are just replacing it with new money

>As noted above, the nuevo peso (new peso) was the result of hyperinflation in Mexico. In 1993, President Carlos Salinas de Gortari stripped three zeros from the peso, creating a parity of $1 New Peso for $1000 of the old ones.

>The transition was done both by having the people trade in their old notes, and by removing the old notes from circulation at the banks, over a period of three years from January 1, 1993 to January 1, 1996. At that time, the word "nuevo" was removed from all new currency being printed and the "nuevo" notes were retired from circulation, thus returning the currency and the notes to be denominated just "peso" again.

https://en.wikipedia.org/wiki/Mexican_peso#Nuevo_peso

>>132282216
Inflation helps or doesn't affect people at the top of the chain or anyone that sets prices, it hurts the employee, consumer or whoever is last in line in a market transaction, because they are the last to get raises or have their purchasing power increased, and it's only at the discretion of others if they do.

>>132282146
deflation can only occur when for a long enough time 0 new dollars are printed. Deflation/inflation is the quantity of people related to the quantity of dollars.

at least I think.

If there are more and more millionaires, more and more people that can spend more and more money without thinking too much twice about it, than store owners will say "maybe we can raise our prices, because it makes little difference whether these 'much money having people' spend 2 dollars or 3, or 5.

thats what inflation does, and then everyone else, has to spend more of their money to buy what used to be 2 dollars, now is 5.

>>132282634
so give some examples: a person works and got $1000 pesos, and could get milk and bread and eggs for 1000$ lets say.

Then the government said: There are too many pieces of paper. We will destroy some, and trade yours in for new ones.

Then the person works and is given $1 peso, and they can buy more or less with it?

>>132283218
>Then the person works and is given $1 peso, and they can buy more or less with it?
the same
you are not creating new money you are just exchanging it for bills with more or less zeros

>>132283567
ok, I see.

If only 1000: 100 dollar bills existed

Take the 1000: 100 dollar bills

And turn them into 10 dollar bills.

Then 1000: 10 dollar bills would exist

doesnt this always hurt the poor the most?

>>132284214
>doesnt this always hurt the poor the most?
not really
it just makes it easier to do smaller transactions
if a house costs $1 what do you use to buy an apple?
You could do the same thing by adding fractions of a cent if you wanted

>>132275992
>Because it encourages people not to spend any money, since every day what they want gets cheaper.

Hmmm, I could buy food today, but I guess I'll wait 6 months for it to drop 10 cents in value first

No wait, you're a fucking retard.

>>132278220
Needs vs wants, elastic vs inelastic goods

Stop being a retard and telling other people they're retards when you are the king of the retards

>>132284526
so what does it actually change? If the overall value is the same?

>>132275862
>posts literally the only product that has ever gone down in price
Deflation is not a thing

>>132278655
>>132278737
Yes it is good when it just happens, you can buy more, but remember, its the corporations and all other firms that take a heavy toll for it.

Less for the same amount means future financial losses.

Future financial losses will have to be compensated by cutting the pay for workers.

Unemployment will rise to uncontrollable levels. People wont be able to buy anything else. Less investment. More bankruptcy.

Long term, it dictates a hell for an economy, and its people, who no longer have the means to buy even a low priced product.