Lately I have been seeing posts and articles in which the writer gets all hot under the collar about the threat of deflation. Frankly, after living my whole life under inflation, worrying about whether my savings, even with interest, will be worth less than when I put the money away, I welcome deflation — if it will really occur. I've seen the 3¢ stamp of my youth go to 44¢ — and it's probably going to go even higher. I don't ever go to the movies — $10 a pop seems fantastic when, as a kid, I paid 25¢, and adults paid 40¢ — and got to see two movies for the price! Yes, my first job paid $6500 a year, and I had a Master's degree; and now even the guy at McDonald's makes a heck of a lot more than that. But I think I'd rather make the wages I made in the 1960s and 1970s — if prices were also at that level — so I knew that if I put away the money in savings I'd still have its value when I needed it.
People argue that, with deflation, people would never buy anything — they'd forever be waiting for prices to come further down. But you have to eat every day, and things wear out, so you'd need to replace them. And look at the one part of our economy that has been deflationary: electronics. The Commodore 64 I bought in the 1980s cost more in current dollars (not inflation-adjusted dollars!) than the laptop I bought in 2008. And the laptop is vastly more powerful! And even a calculator that I can buy for $10 does as much (or more) than the one I paid $80 for in 1973. Yet people buy computers, and calculators, and don't wait for prices to come further down. They want the items now, and will upgrade in the future. So this is a fallacy.
So, I repeat, what's wrong with deflation? I would be happy to see it!
People argue that, with deflation, people would never buy anything — they'd forever be waiting for prices to come further down. But you have to eat every day, and things wear out, so you'd need to replace them. And look at the one part of our economy that has been deflationary: electronics. The Commodore 64 I bought in the 1980s cost more in current dollars (not inflation-adjusted dollars!) than the laptop I bought in 2008. And the laptop is vastly more powerful! And even a calculator that I can buy for $10 does as much (or more) than the one I paid $80 for in 1973. Yet people buy computers, and calculators, and don't wait for prices to come further down. They want the items now, and will upgrade in the future. So this is a fallacy.
So, I repeat, what's wrong with deflation? I would be happy to see it!
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