Post
Topic
Board Economics
Re: Is deflation truly that bad for an economy?
by
tee-rex
on 15/03/2015, 17:39:34 UTC
If there is deflation, people will tend to hoard the money they have since the "value" of currency will increase in the coming future. This will reduce the demand of the goods drastically.

This is yet another common misconception based on nothing but intuitive (mis)understanding. When you buy a car, it starts depreciating right after you begin driving it (in fact, it would depreciate even if you didn't drive it at all). According to your reasoning, people wouldn't buy cars and other quickly depreciating things they can happily live without.

Deflation can actually postpone consumption, but this effect will be temporary and short-lived.

Deflation is not the same as depreciation.  Deflation is a decrease in the general price level.  Depreciation is the consumption of capital. 

You seem to be writing just for the sake of writing and having your word heard. What exactly do you disagree with me on? I never said that deflation is the same as depreciation, I was trying to explain the psychological motives behind human behavior, why people will still spend under deflation.