Quote from: tee-rex on March 26, 2015, 09:57:21 PM

Since producers are more inclined not to reinvest their profits under deflation, thereby they have to cut production and lay off people (for reasons explained above). This directly hits on the consumer. Thus we have the consumer suffering in both cases, but deflation is more dangerous since it also hits hard on the producer. And not a trace of mirroring by any means.

It seems to me whether producers are more inclined to reinvest or not is immaterial, as I'm talking about a producer that's still producing.

Anyway, I think we're going to have to agree to disagree on this. I'll just finish with a generalisation of my #177.

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Let's assume it takes 3 weeks[1] to produce a good and we produce goods every 3 weeks.

The cost each week is w_0 = w, w_1 = w(1+p), w_2 = w(1+p)^2, thus w_k = w(1+p)^k

The cost to make the 1st good is W_0 = w_0 + w_1 + w_2 = w((1+p)^3 - 1)/p
The cost to make the 2nd good is W_3 = w_3 + w_4 + w_5 = W_0(1+p)^3

The cost to make the kth good is W_3k = w_3k + w_3k+1 + w_3k+2 = W_0(1+p)^3k

Now, in #177 we were able to maintain R = 2W, can we still do that?
Yes, as the cost of making a good is (1+p)^3 times the cost of the prior good while prices are inflating at (1+p) per week, much like in #177. In fact the only real difference is that we start with a different value for W_0 (was W_1 in #177, I think).

So R_k = 2*W_K works just fine, and we can maintain a constant mark up (R/W = 2).

As with #177, the deflation case is trivially the same, with p replaced by q = -p/(1+p).

[1] We can easily generalise to n weeks. Also, "weeks" can be generalised to any time period we chose.
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Let's do a quick analysis of profit (this is OTTOMH, so I'd welcome anyone pointing out flaws in the maths or logic)
I'll use g for gain. Note: g is a function of p, that is g = g(p).

g_0 = R_0 - W_0 = W_0

g_3 = R_3 - W_3 = W_3 = W_0(1+p)^3

So g is increasing/decreasing in line with inflation/deflation.
So in real terms g = g(p) can buy the same amount of goods as g' can where g' = g'(0).
Thus neither inflation nor deflation is an incentive or disincentive to produce stuff.
Also consumers are no better or worse of under either inflation nor deflation.
Of course all this assumes wages and prices adjust in step each week (or whatever period we're using).
That doesn't necessarily mean the flations are not mirror images if that's not the case, but the analysis will be trickier, and interesting I think.
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Thanks for taking the time to debate, it's always useful to have someone challenge your ideas, even if we don't agree on all points (or any).