Quote from: deisik on November 06, 2013, 03:46:37 PM

Quote from: whitslack on November 06, 2013, 03:13:00 PM

I don't see the problem for the producer. Could you explain it?

Easily. Under deflation it is less profitable and more risky to produce goods. A producer buys raw materials and makes his merchandise today (when prices are higher) but sells tomorrow when prices are lower, so there is no incentive to expand production or may be even keep it at the same level. In more detail it is written in any decent economic textbook

Okay, that makes sense. Thanks for the simple explanation.

I suspect that this pattern of production is on its way out anyway. The world is shifting to just-in-time manufacturing. Inventory is expensive to store and maintain. Automation and computerized supply chain management are now allowing goods to be produced as they are sold. Under this new model of production, deflation would not have a significant impact. (Hyperdeflation could still be bad, but Bitcoin probably will never experience hyperdeflation.)