Complete layman’s take on deflation, but wouldn’t trading basically stop with deflation?
Say I buy a product for 4$ and the next day due to deflation I can only sell it for 3$, why would I then go and try to trade said product?
It would be bad to have anything on shelf for a prolonged period. Food would probably not be affected due to its short shelf-time, but hardware stores, electronics, basically anything else would have the risk of significant losses. These stores would simply close, no?
That also extends to global trade - big cargo ships are sailing for weeks before they can distribute their goods. The whole time the products would loose value.
Probably I’m wrong, but if that’s true, deflation would really make the shit hit the fan.
Say I buy a product for 4$ and the next day due to deflation I can only sell it for 3$, why would I then go and try to trade said product?
That $3 is worth as much as that $4 was now because deflation made the value of the dollar go up. So the only change is that “number go up” didn’t happen on a purely psychological level. If your trade provides value then you can trade for more value.
True, the sentence about the items loosing value is incorrect.
However, my argument is still valid, why would I go and buy the thing in the first place, if I just could have waited for today and still have 4$?
I would have „gained“ a dollar by doing nothing instead of taking the trouble of procuring the item.
Because deflation isn’t going to be at that rapid a pace. If inflation was such that an item priced at $3 today gets priced $4 tomorrow, that means a daily rate of change of ~33.33% which is an insane rate of inflation and would be a problem as well, but nobody uses that to claim inflation is absolutely bad.
Who is going to hold off on buying something if it’s 2% “cheaper” after a whole year? People certainly don’t put off buying phones even though phones still get way higher than 2% increase in performance every year or two.
As I said the my first comment, I’m talking about stuff that may be shelved a longer time. And at large scales, small percentages do matter significantly.
With inflation, having something shelved only looses value if something newer and better comes out. Deflation would add deflation itself as another risk.
To put it in other words: I have to raise the price for my items in stock along with deflation to make the trade worthwhile, which in turn contradicts deflation since then the value you get for your money is the same.
The exaggeration describes hyperdeflation which is a completely different beast, so it’s not illustrative of the impacts of deflation in general. Either way, you’re focusing on the raw price amount without considering the value of the items being exchanged. If anything, deflation would help with selling since if a store has an item on sale for $10, a year later at 2% deflation selling for the same price it’d be worth 20 cents more in relation to the previous year’s dollar value and the store wouldn’t have to increase the price to make up for a loss in the value of the dollar. From the customer’s perspective, they don’t see a price increase even though the value of their dollar has increased.
Complete layman’s take on deflation, but wouldn’t trading basically stop with deflation?
Say I buy a product for 4$ and the next day due to deflation I can only sell it for 3$, why would I then go and try to trade said product?
It would be bad to have anything on shelf for a prolonged period. Food would probably not be affected due to its short shelf-time, but hardware stores, electronics, basically anything else would have the risk of significant losses. These stores would simply close, no?
That also extends to global trade - big cargo ships are sailing for weeks before they can distribute their goods. The whole time the products would loose value.
Probably I’m wrong, but if that’s true, deflation would really make the shit hit the fan.
That $3 is worth as much as that $4 was now because deflation made the value of the dollar go up. So the only change is that “number go up” didn’t happen on a purely psychological level. If your trade provides value then you can trade for more value.
True, the sentence about the items loosing value is incorrect.
However, my argument is still valid, why would I go and buy the thing in the first place, if I just could have waited for today and still have 4$? I would have „gained“ a dollar by doing nothing instead of taking the trouble of procuring the item.
Because deflation isn’t going to be at that rapid a pace. If inflation was such that an item priced at $3 today gets priced $4 tomorrow, that means a daily rate of change of ~33.33% which is an insane rate of inflation and would be a problem as well, but nobody uses that to claim inflation is absolutely bad.
Who is going to hold off on buying something if it’s 2% “cheaper” after a whole year? People certainly don’t put off buying phones even though phones still get way higher than 2% increase in performance every year or two.
Of course, im exaggerating for simplicity.
As I said the my first comment, I’m talking about stuff that may be shelved a longer time. And at large scales, small percentages do matter significantly.
With inflation, having something shelved only looses value if something newer and better comes out. Deflation would add deflation itself as another risk.
To put it in other words: I have to raise the price for my items in stock along with deflation to make the trade worthwhile, which in turn contradicts deflation since then the value you get for your money is the same.
The exaggeration describes hyperdeflation which is a completely different beast, so it’s not illustrative of the impacts of deflation in general. Either way, you’re focusing on the raw price amount without considering the value of the items being exchanged. If anything, deflation would help with selling since if a store has an item on sale for $10, a year later at 2% deflation selling for the same price it’d be worth 20 cents more in relation to the previous year’s dollar value and the store wouldn’t have to increase the price to make up for a loss in the value of the dollar. From the customer’s perspective, they don’t see a price increase even though the value of their dollar has increased.