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NZT48

(Economic) deflation is a good thing.

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(Economic) deflation, otherwise known as an increase in purchasing power, is a good thing. If goods and services are getting cheaper it means people have more money to spend on other things and the people will be getting wealthier and living standards will improve.

 

Change my mind.

Edited by NZT48
grammar

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Goods and services do not get cheaper. They get more expensive relative to purchasing capacity of individuals.

 

Pick any country that transitioned from capitalism to socialism and observe. Venezuela is a good case.

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open a hamburger place next to a McDonalds, tell us how it works out

 

or , if you want a quick study, google Walmart and the Pickle jars

Edited by TheManFromPOST

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I did not fully have my head around this.

 

I think what I was saying is true if the money per capita remains the same.

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5 hours ago, NZT48 said:

I did not fully have my head around this.

 

I think what I was saying is true if the money per capita remains the same.

 

How could money per capita be the same though if businesses charge less for goods? The only things that could get cheaper would be imported goods which in turn would negative affect businesses in Australia who no longer provide these goods which is a worse scenario again. 

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Deflation followed the stock market crash of 1929, and lasted for like 3 years. The global economy didn't start any recovery until 1933. One good thing out of 1929 was debts were wiped and reset, in 2008 the same debt dragging us around now is still here.

Edited by Jeruselem

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22 hours ago, Leonid said:

 

 

Pick any country that transitioned from capitalism to socialism and observe. Venezuela is a good case.

I wonder when @Kimmo is moving to Venezuela...

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15 hours ago, fliptopia said:

How could money per capita be the same though if businesses charge less for goods? The only things that could get cheaper would be imported goods which in turn would negative affect businesses in Australia who no longer provide these goods which is a worse scenario again. 

What does how much businesses charge have to do with the amount of money that exists?

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Simplistically, If businesses make less money per item they have less money to pay people which means that people have less to spend. Someone will end up with more money somewhere. But that doesn't help the general population of your country if that money is in another country. 

 

Of course if everything offshore is comparatively expensive more stuff gets bought locally which is nice but if our inflation doesn't match overseas then we end up with comparatively less (excluding exporters). You could view it as a good thing with a potential lower cost of living but it comes with a lower income too and increased comparative buying power for imports. Australia would need a lot of investment in manufacturing but unless we go down to china/Bangladesh level wages it will never be financially viable enough. 

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Businesses making less money per item does not mean they have less money to pay employees. As productivity increases and the population grows and new inventions occur and liberty increases and business partner costs decrease, the time and cost it takes to produce said items will decrease and so the number of items produced for the same amount of money will increase.

Edited by NZT48
I mean "employees", not "employers"

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and in order to remain compdative i buy a machine that does the work of 20 skilled workers, that now only needs one idiot to monitor 

19 skilled workers on the scrap heap 

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You mean productivity increases, savings are passed on to customers and 19 people are freed up to do more productive things? Sounds good to me.

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5 hours ago, twinair said:

I wonder when @Kimmo is moving to Venezuela...


I’d like him to leave the forum, not this mortal coil.

 

The reason I call him “grave liner” is because his ideological purity ensures that practical communists will slaughter him first. I.E. quite literally the first layer of a mass grave.

28 minutes ago, NZT48 said:

You mean productivity increases, savings are passed on to customers and 19 people are freed up to do more productive things? Sounds good to me.


That’s a really simplistic model.

 

Fact is those workers have been doing something a machine can do - which generally means they’re unskilled workers.

 

What more productive things are they going to do?

 

If you’re not watching the Democratic Primaries, you should. There’s one stand-out - Andrew Yang.

 

He keeps talking about the coming changes.

 

Do you really think that in 10 years the West will have truckies (autonomous vehicles), cab drivers (autonomous vehicles), security guards (cctv with analytics), posties - in the same numbers?

 

Blue Collar work is dying in the arse.

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Exactly. And a lot of blue collar workers will never be suitable for more skilled jobs. So we have to come up with some realistic way for people to still be productive members of society. It's going to be harder as the numbers who are replaced increases. 

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Deflation has the effect of reducing wages since the prices charged by the employer cannot grow and wages go backwards effectively.

If people get paid less, they spend less because they have less money to spend as well as the ability to pay of debts decreases since debts pile up faster than wages grow.

Edited by Jeruselem

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14 hours ago, fliptopia said:

Exactly. And a lot of blue collar workers will never be suitable for more skilled jobs. So we have to come up with some realistic way for people to still be productive members of society. It's going to be harder as the numbers who are replaced increases. 

Why would "a lot of blue collar workers will never be suitable for more skilled jobs"? Why can't they get educated/trained? Not that it is anyone's business but theirs.

 

9 hours ago, Jeruselem said:

Deflation has the effect of reducing wages since the prices charged by the employer cannot grow and wages go backwards effectively.

If people get paid less, they spend less because they have less money to spend as well as the ability to pay of debts decreases since debts pile up faster than wages grow.

Deflation does not necessarily have "the effect of reducing wages". As productivity increases the cost it takes to produce goods and services decreases so the employer has more money.

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49 minutes ago, NZT48 said:

Why would "a lot of blue collar workers will never be suitable for more skilled jobs"? Why can't they get educated/trained? Not that it is anyone's business but theirs.


They can but it takes time and money which they do not have.

 

49 minutes ago, NZT48 said:

Deflation does not necessarily have "the effect of reducing wages". As productivity increases the cost it takes to produce goods and services decreases so the employer has more money.


The exact opposite is true. In an economic deflation, businesses lay off staff which increases demand for jobs (supply). 
 

As such wage growth first stalls, then reverses.

 

Again: Venezuela

Again: Why socialism doesn’t work

Again: Why economic growth is a good thing if you’re not a psychopath who hates people.

Edited by Leonid
Further explanation
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What has this thread got to do with socialism?

 

Why would deflation cause more unemployment?

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20 minutes ago, NZT48 said:

What has this thread got to do with socialism?

 

Everything. It’s a thread about horrible economic policies, isn’t it?

 

20 minutes ago, NZT48 said:

Why would deflation cause more unemployment?

 

You’ve just had that explained to you.

 

But lets try again nonetheless?

 

Deflation causes a drop in demand. What happens when there’s a drop in demand?

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It's a thread about deflation, not horrible economic policies.

 

Deflation causes "a drop in demand" for what? You did not answer the question. You said "businesses lay off staff". Why would businesses lay off staff and why can't the laid off staff get other work?

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11 hours ago, NZT48 said:

Why would deflation cause more unemployment?

 

... Nup - not doing it.

 

You always do this: turn up, post something unutterably stupid, ask for comment, then demand everyone explain said comments.  Not interested in standing in for your brain - use it for yourself.  If you actually have an opinion of your own about something, articulate it and try to defend it when challenged.  ^This sort of thing I can only interpret as trying to stimulate everyone else into arguing amongst themselves, and personally I find that intensely annoying.

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Cybes, just noticed the Feynman quote in ya' sig', how very Atomic!

 

Very cool.

 

Oops! sorry...off topic.

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1 hour ago, NZT48 said:

It's a thread about deflation, not horrible economic policies.

 

Deflation causes "a drop in demand" for what? You did not answer the question. You said "businesses lay off staff". Why would businesses lay off staff and why can't the laid off staff get other work?

 

When a person is laid off, or made redundant, that job no longer exists. There is now one less job in the pool of jobs available to the same amount of people. Dead simple.

 

Jobs are only created as businesses grow. Economic inflation is an indicator of growing productivity.

 

Inflation/deflation is not the precursor to job growth or loss, it's a symptom of it. You're putting the cart before the horse, and drawing fallacious conclusions. As usual.

Edited by SquallStrife

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Deflation follows  a depression (a really bad recession) or recession. Demand for goods and services drop, and hence their prices in response. The suppliers of these goods and services make less money well because they have to drop prices to get additional demand (lower profit margins). The production cost might drop but this usually means employees get pay cuts or people are retrenched because they are surplus to requirements to maintain profit margins. More people with lower pay or worse no jobs causes less goods and services to be bought, and well ... the cycle bites again. You need people with money for increase demand but in a deflationary environment, wages don't rise and more likely to fall or people just lose jobs. Yes prices and costs might drop but if there's no people to buy stuff, less of it is made.

 

I didn't make this but it explains what I'm trying to explain

 

ia-deflation-cycle.gif

Edited by Jeruselem

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