Quote from: dinofelis on April 18, 2015, 06:21:16 PM

Quote from: twiifm on April 18, 2015, 05:04:00 PM

Stop bringing up iphones. That has nothing to do w deflation

Of course that the lowering of the i-phone 5 price when the i-phone 6 comes out, has nothing to do with deflation, this is as clear to me as to you.

But the ARGUMENT you (and so many others) use against deflation is that the diminishing of prices make consumers delay their consumption. That *argument* against deflation doesn't assume deflation or anything, but makes the assumption that if a consumer desires item X, and knows that the price of item X will be 2% lower next year than today, he will delay the acquisition of item X to next year. The *reason* why that price is lowering for that hypothesis is not specified. It is (erroneously) assumed that if desired-for items will lower in price, consumers will delay their acquisition to profit from the lower price.

And THAT hypothesis is contradicted by the i-phone example.

Because if it were true, people that KNOW that their desired-for i-phone 5 which costs them, say, $500 today, that exact same i-phone, will cost maybe only $380 when the i-phone 6 will come out next year, and will wait for it, to profit from the price drop.

So if that hypothesis were to hold, i-phone 5 would only massively be bought when the i-phone 6 would come out, because consumers would have delayed their acquisition to profit from the price drop (which, in this case, we all agree, has nothing to do with deflation, but is a price drop all the same).

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Lowering interest is not Keynesian its monetarism

Lowering interest to counter deflation is monetarism. Lowering interest rates to try to stimulate the economy, on the other hand, I thought, was pure Keynesianism.

Because in deflation ALL prices fall -- including wages. People hold off consumption because they don't have money to spend or is unsure about future income??

Keynes puts more emphasis on stimulus spending. Lowering interest by itself without govt spending is not really what Keynes is about since he was more into trying to get back into full employment. Sorry I'm wrong about monetarism. Its more like the left mainstream economists like Lucas, Krugman, or Summers. These guys would be labelled as a Neo-Keynesian, which most Old Keynesian or Post Keynesian don't consider in the spirit of Keynes. IMO they have more in common w monetarists -- for instance being proponents of QE