Quote from: Impaler on December 30, 2013, 04:23:25 AM

Quote from: Hawker on December 29, 2013, 09:01:33 AM

The problem is that we don't know if deflation is really that bad a problem. The only modern example available to us is Japan where deflation has been around for 20 years now. Japanese society is having a demographic crisis caused by low birth rates. If your population is going to fall by over a third over the next generation, the value of houses and land will also fall since there is too much. So the Japanese domestic economy is theoretically screwed and empirically we can see deflation has taken root there.

Yet the Japanese have low unemployment and a great standard of living. For example, there are more Michelin star restaurants on Tokyo than most other cities. I don't know of any way in which life in Japan could be said to be worse than life in the UK or US.

One could be forgiven for wondering whether deflation is really such a bad thing?

The Japanese economy over the last 20 years is considered catastrophic for good reason. That nation had a growth curve like a bat-out-of-hell and has now under performed so badly and for so long that it's GDP is now HALF what it was anticipated to be by now. Neighboring nations like South Korea which were far behind Japan have nearly reached parity in PerCapita GDP and if things continue will PASS them. That is like the US being Passed in PCGDP by MEXICO. No person in Japan will describe the last 20 years as anything but an economic disaster.

Your correct that Japanese SOCIETY has not crumbled, but that is because the Japanese have one of the most resilient social structures on Earth and a VERY extensive welfare state that's kept people out of poverty. Just because they haven't been broken dose not mean they are not stressed and 'in a bad place' with the present economy.

Lastly, if your arguing that deflation only occurs when a society is already 'screwed' by demographics or other calamities that eliminate or reduce the potential for future growth then why did the US experience it so frequently in periods that deflation defenders like yourself describe as high-growth such as after the CivilWar? Japan had and still has an export based economy, NOT one based on internal consumption, their demographic problems present a challenge but they are not a fundamental limiter of their growth when automation is everywhere, the total world trade continued to grow after Japan stagnated, and their is no reason that Japan could not have continued to at least maintain if not grow it's share of that market had it continued to be healthy.

Everything you say is true except for the fact that Japanese people have not been affected that much. Their living standards compared to the rest of us are the same now as they were 20 years ago. Individual hard cases must exist but overall the Japanese people have a fine lifestyle. The fact that the Koreans worked their way out of abject poverty doesn't detract from this point.