[hugh4]

Inflation of zero is just as good for encouraging spending as small positive inflation -- the rate you'll get by low-risk investing will always beat inflation by a bit.

But the moment inflation dips below zero it really starts discouraging spending.

So I suspect it's about having a margin for error. Target zero and it will spend a lot of time negative, target mildly positive and it will spend most of its time mildly positive.

[ancap]

>But the moment inflation dips below zero it really starts discouraging spending.

While this view is common, it is incorrect.

This is obviously evident when you consider the price of computers and other tech products over the decades.

[AnimalMuppet]

Even in computers, you had the dilemma of "should I buy now, or wait a year and get the same thing for less money?" That was a standard question for many years.

[ancap]

Despite that, companies like Apple have hundreds of billions in revenues. Which is to say, the falling prices aren't a real problem. After all, the same person could say they could get the same thing for even cheaper in 2 years, 3 years, 5 years or 10 years.

[AnimalMuppet]

True. And yet, it still means there is some pushing of demand into the future due to the deflating prices. Which means that your argument in the GGP post is false. The fact that, despite the pushing of some demand into the future, Apple makes tons of revenue does not change the fact that demand is still being pushed into the future. That is, your reply, while true, is irrelevant.

[ancap]

>True. And yet, it still means there is some pushing of demand into the future due to the deflating prices. Which means that your argument in the GGP post is false.

I never said deflation cannot defer people's demand. The comment I originally responded to indicated that a deflation rate of 1% would, in general, discourage spending. I would wager, that almost no one defer buying an iPhone if they knew for a fact that it would be 1% cheaper a year later. Just as I don't think that knowledge that the price would be 1% higher a year later would cause someone to buy an iPhone they were not already planning on buying.

What I'm getting at is falling prices, in and of themselves, are not a huge problem. If you want to say that a deflation rate of 20% would cause huge problems, ok, maybe that's true for some products. Conversely an inflation rate of 20% would cause huge problems in some realms. Inflation is not generally good and deflation generally bad--that is the myth I'm addressing.

[AnimalMuppet]

1% deflation doesn't shift demand very much. OK, I'll buy that. (Pun not intended, but not avoided.)

[zo1]

Does the cumulative "push" of "demand" into the "future" not have the systemic effect that in the future, there will be "current" demand?

This is one thing I've never understood about this whole "inflation incentivizes people into spending now rather than later". If we're simply pushing the demand into the future, aren't there already people from the past whose "future time to spend" is the current moment?

<opinion type="rant"> From my perspective, all that I see inflation doing is artificially forcing people to put more money into the stock market and investing than they should be.

[ancap]

That is a good point that I didn't address. Deferring spending in perpetuity is worthless unless someone gains some personal satisfaction merely from saving.

[mizzao]

The price of computers dropped because of returns to technology investment, not because of deflation.

[ancap]

Why the prices dropped is irrelevant. Clearly spending on tech products has not ceased.