You are viewing a single comment's thread from:
RE: Does Deflation Spur Consumption? (Contrary to conventional Wisdom)
Interesting.
In a deflationary environment people face an opportunity cost by holding on to resources.
Perhaps I am misunderstanding - I'm no economist, but doesn't deflation mean that the money or capital that you have today will have more buying power tomorrow?
If that is correct then wouldn't that encourage people to hoard and wait longer before spending?
People do not always act rationally so I don't know if it would affect their behaviour in that way am just not getting your reasoning on this.
Money is not a resource. Deflation encourages people to sell resources (actual tangible stuff) to hoard intangible money. All trades only cause resources to change hands. The goal is to move physical resources to the highest purpose the most efficiently.
Hoarding money is a virtual resource which means it is not interfering with allocating of physical resources.
OK thanks for explaining:)
That's a powerful comment.
I sometime feel so angry when I think about those guys i.e. Federal Reserve that creates
currencymoney out of thin air and can wager so much power over who gets what but in recent weeks I've mostly been filled with enthusiasm thinking about Steem and it seems like Steem could possibly dilute Fed's power a lot more elegantly that I could ever hope.If you are in the market to buy a computer, smartphone, or television today, you can be reasonably sure that waiting 6 months will get you something better at the same price, or the same item at a lower price. Yet those industries thrive. "Hoarding" is just another bogeyman illusion used by scaremongers who want to make excuses for their interventionist policies that plunder the productive economy.
There is real inflation/deflation and price inflation/deflation.
Real inflation/deflation is directly tied to money supply. When there is more money, it is inflation. When there is less, it's deflation. It really is that simple. Generally speaking, money loses buying power during inflation and gains buying power during deflation. Other factors might change that and it's not equal across all sectors or products/services, due to the forces of supply and demand.
Price inflation/deflation is simply a change in the price. If it goes up, it's inflationary. If it goes down, it's deflationary. This is almost invariably tied to the forces of supply and demand.
There is a great deal of confusion regarding this, because economists (and wannabees) often simply use the term "inflation" to refer to rising prices. That's inaccurate. They should refer to this as price inflation.