Quote from: louisLavery on March 26, 2015, 08:57:18 PM

Quote from: tee-rex on March 26, 2015, 08:21:31 AM

You assume that goods are produced and sold instantaneously, which is not the case in real life. Production cycles can be as long as a few years. If the time span of your production cycle was equal to zero, then neither inflation nor deflation would have any impact on your profits (in percentages), which is what your example reveals.

Correct usage should be R_t2/W_t1, where t2 and t1 are different time moments for revenue and cost flows in a production cycle, t2 > t1. In inflation R_t2 is always greater than W_t1 (provided we were profitable before inflation set in), whereas in deflation R_t2 may become less than W_t1 (even if we were profitable before deflation set in, i.e. R > W and R/W time-invariant). That would mean a loss. So, in inflation you can never mathematically suffer a loss due to inflation per se (if you were profitable before, of course), while in deflation it becomes quite possible through the effect of deflation as such.

I feel we are arguing past each other. That's probably my fault as, as I said, I hadn't analysed profit. I had a sleep on it but likely should have spent another night on it, sorry about that. Let's recap my (and many others) claim that inflation and deflation are mirror images.

In my original post #170 I said,

"Inflation favours those with debt while penalising savers.
Deflation penalises those with debt while favouring savers."

I think we can agree on that, yes?

I followed that with,

"For every argument for/against deflation there's a symmetric argument against/for inflation. So it seems to me 0% is best as it favours neither."

Thus implying they are mirror images.

You came back with an argument (#176) about profit turning negative, yes? (I then started trying to form a view about profit. That, I think, was a mistake, on my part).

The thing is, that profits can turn negative under deflation is not an argument against my conjecture, AFAICS.

Profits relate to a producer. A producer's mirror is a consumer. Those are the symmetric entities I should have identified, and be debating. So let's do that.

My claim is that if inflation favours the producer (and so disfavours the consumer) then deflation disfavours the producer (and so favours the consumer).

But it seems to me that you've already argued deflation disfavours the producer, yes? And I assume you're of the opinion inflation favours the producer, yes?

So we are in agreement on this, yes?

Of course that doesn't prove my conjecture, I know.

Anyway, I'll leave it at that for now, and wait see if you agree my points so far,

It helps if you think of the economy of an ecosystem instead of dichotomy between producers/ consumers, borrowers/ savers, etc..

Deflation is bad for everybody. Slight inflation advantages some and tolerable for most