Quote from: ilpirata79 on November 07, 2013, 11:27:10 AM

My statements are compatible with deflation.

No

Quote from: ilpirata79 on November 07, 2013, 11:27:10 AM

In a month I sell something at, say, A'=A-15/100*A. I had to buy material which costed, FIFTEEN days before I selle, x'=x-20/100*x , y'=y-20/100*y, z'=z-20/100*z, and I added value Q'=Q+somePercentage/100*Q, so that A'= x'+y'+z' + Q'.

Fifteen days before (starting point) you would have bought your materials at their initital price x, y and z. If you sold your final product at that very moment you would get your initial profit Q, i.e. A=x+y+z+Q, but you can only sell fifteen days after you bought materials at the lower price which is now A'=A-15/100*A due to ongoing deflation. So your profits have shrunk by A-A' (if you are on a narrow margin you may even suffer losses). When you make second turn (if ever) you buy materials at the new lower price x'=x-15/100*x, y'=y-15/100*y, z'=z-15/100*z (I changed the deflation factor to that of A to keep things correct), but you will again sell A only fifteen days later at the price which will still be lower, i.e. A''=A'-15/100*A' since deflation continues. You won't return to your initial profitability unless and until deflation comes to an end. Like inflation, it is not a one-off drop in prices, it is a lasting process

Deflation will always be ahead of you. The longer your production cycle, the more profit will be stripped. Probably you meant that your profits/losses won't be shrinking/expanding any further (i.e. A-A'=A'-A''=A''-A'''=..., provided the deflation rate doesn't change) but this was not my point