Post
Topic
Board Economics
Re: Global Financial Crisis scenarios
by
tee-rex
on 03/07/2014, 21:07:29 UTC
Quote
You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.

Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!

You seem to be missing the whole point. It is not a question of buying less, it is a question of saving more! When prices go down, people (me included) don't necessarily buy less, but they do save more shrinking from additional expenditures and consumption that you would expect from the fallen prices. And this has been known since long ago (and written in the textbooks, by the way). Smiley

And this is enough to cause negative or even devastating effects on the economy.

Read your message twice but am still not sure if it's a joke or not : if you buy as much and you save more it is a bad thing?

If you think it a joke, I don't think we're going anywhere, sorry. Additional savings due to prices falling reduce producers' profits. This can only be compensated by expanded consumption (provided all other things being equal), but as I said before, increased saving evidently holds back this. Smiley

And consumption is an investment by itself, but saving postpones it, so that you can't have it both ways, whether you like it or not.