Quote from: dinofelis on March 06, 2015, 07:38:09 AM

Quote from: D4C on March 05, 2015, 04:30:42 PM

It means people won't buy anything. Why buy something worth $ 200 today when you can get it tomorrow for $175. People don't buy, business go bankrupt and people lose their jobs.

But this is exactly contradicted by the observation that people are willing to spend a night before an Apple shop to buy an i-phone 5 when it came out, while if they waited for a year, they would have gotten that same i-phone 5 for much less money (namely when the i-phone 6 came out).

So this myth is empirically not true.

And not just for i-phones. It has been true for the personal computer market since about 3 decades. The SAME product in the computer market devaluates like hell, and nevertheless it is part of the biggest industry (consumer electronics) on this planet. If you go to the supermarket, and you look up the price of a specific computer NOW, and you look at its price 6 months from now, you will see that it has lowered in price (simply because more performing machines came out). So, according to this myth, NOBODY would buy computers, because they will be cheaper 6 months from now. That is NOT what is observed, on the contrary.

So this "people will stop buying because it would be cheaper for them to buy the same thing 6 months from now" is simply NOT TRUE.

And that kills the main argument for "inflation is needed for people to spend stuff and deflation will kill consumption".

There is deflation caused by the increase in productivity and technological innovations (consumer electronics as the most obvious example), and there is deflation caused by the contraction in consumption. In the latter case the phrase "deflation will kill consumption" makes no sense, since deflation is an effect, not a cause. I hope this won't be a matter of dispute.