[roenxi]

> when real estate prices have dropped by more than 50% in tier 2 and below cities, and deflation has raged on.

Can other economies copy that part? I know a bunch of people who'd like to be able to afford more houses & more groceries at the same time. I'd like that, I can't realistically afford a house in the city I live in without a 50% price drop.

I'm sure China has a lot of problems, but key goods getting cheaper is not one of them. What I'm guessing you meant to say is that retirees were led to put too much of their savings into the housing market and are discovering there is a glut. Which is tragic for them. But prices dropping is a good thing; the unachievable ideal is a utopia where everything is free, ie, 100% deflation.

[kayewiggin]

China's real estate prices having dropped 50% or more has been accompanied by/caused by wages being slashed 50% or more, and increasing unemployment rate, such as 30%+ for youth.

Here are some good posts on why nobody wants deflation:

https://www.reddit.com/r/AskEconomics/comments/uzq5bu/why_is...

https://www.reddit.com/r/AskEconomics/comments/mbsxyl/can_so...

https://www.reddit.com/r/AskEconomics/comments/yotf0c/i_dont...

also coincidentally and recently, China’s Xi Jinping asked ‘What’s so bad about deflation?’ amid economic slowdown https://fortune.com/2024/12/29/china-economy-deflation-xi-ji...

[roenxi]

So some might suggest that the problem is wages being slashed by >50%? Falling real wages are actually a problem. And, AFAIK by definition, are not influenced by inflation or deflation. But if wages had fallen by <40% and prices by >50% then the overall situation was probably improving. A bit chaotic to be comfortable, but not fundamentally worse.

And there is an unemployment problem too, obviously.

[suraci]

Your reference is a bs

'CCP is a secret and authoritarian regime that wields immense power' vs 'Some random reporter with English firstname and Chinese lastname know what Xi said before he go to bed'

Have you ever wondered if there's a tiny possibility that the media and the reporter *might* be lying?

...

[rangestransform]

It’s definitely less rule by committee than the Hu administration, and even the Xi administration pre-deposing Li Keqiang

[robgibbons]

It's commonly referred to as a deflationary spiral because the falling prices lead to people (perhaps counterintuitively) holding off from large purchases, anticipating a continued drop in prices. Sort of a "buy the bottom" mentality.

The lack of spending then further contributes to falling prices, job cuts, businesses closing, etc. It's really not a situation any economy _wants_.

That said, I empathize with your sentiment.

[roenxi]

That is obviously wrong to the point where I am confused why someone always makes the claim. I'm looking forward to running in to someone who can actually follow up with some sort of defence of the position. Extraordinary claims, extraordinary evidence style.

Consider the computer industry. Prices have been falling pretty much across my entire life. Supply-demand suggests that people will keep buying new computers as the price drops and that is exactly what is happening. Demand for compute has never been higher. There is no waiting for improvements, if anything there is a mad rush to buy hardware that everyone knows is about to be obsoleted. It isn't even an irrational rush, the people buying that obsolete hardware often make good money (eg, bitcoin miners in the heyday).

Basic supply demand says as price drops demand increases. Basic life experience says as prices drop I can afford more and better stuff. Observation of real industries suggests - as we would intuit - that industries with regular price drops are actually healthy and great to be in for consumers in the small and the large. Theory suggests that everyone ignores nominal price fluctuations and focuses on real changes so systemic deflation is irrelevant. None of this supports the idea that deflation is bad.

Pretty sure the anti-deflation crowd are just wrong. They have no evidence or argument [0] as far as I can tell, and all the theory is stacked against them. China surely has problems. Deflation is not a problem. It is just a metric.

[0] EDIT Well I suppose they do have an argument, but it involves people randomly going crazy and choosing to live in poverty and discomfort because it gets easier to buy goods. Which is not an argument I really take seriously.

[bbreier]

Deflation is a problem, but not for the reason mentioned there. The reason deflation is an issue is because it makes holding cash into an investment strategy. If the price of goods is dropping, the value of money is rising, so the more cash I hold the richer I get. This obviously dissuades people with cash from investing their cash into actual productive work, which means fewer jobs. There was a small deflationary bump in American history around the 1930s that helps to illustrate what can happen in a deflationary spiral.

[roenxi]

Like interest on a bank account? Holding cash is already an investment strategy. Bonds are a thing. People have options to hold cash and not lose purchasing power. One of the traditional ways people tackle inflation is they demand interest from the banks sufficient to cover it plus a little more to account for time value of money.

It is rather unlikely that giving people an option that they already have is going to cause a problem. One major benefit of money is that people can hoard it and there is no cost in the real economy because all the resources are still there and prices can just adjust to the amount of cash in circulation.

> here was a small deflationary bump in American history around the 1930s that helps to illustrate what can happen in a deflationary spiral.

The US came out of the 1930s with an economy that was capable of overcoming almost literally the entire world. Again, the evidence that deflation was some sort of major problem is questionable, it seems to have been associated with the creation of one of the most dynamic economies in the history of history.

And the idea that we have this one clear lesson from one instance back in the 30s is just weird and unbelievable. That isn't how history or complex systems work.

[churchill]

I have never understood the concept of the deflationary spiral: no matter how much people want to save their cash for later, there are simply things they can't do without.

Food, energy, transportation, education, etc.

How long are you going to delay getting a new car simply because cars are getting cheaper and better? Once you probe the theory beyond the surface, it collapses. Yes, a deflationary economy will see less cash velocity than a ZIRP economy with cheap cash sloshing around. But, at the end of the day, humans MUST spend resources today to live to see their savings worth more.

[jarsin]

You're missing the debt equation. We live in debt based economy. True across the board deflation (not just some things get cheaper cause of tech etc) means debt is harder and harder to service as wages and earnings fall. As the asset backing the debt goes underwater the debt holders have no choice but to walk away. All banks stop lending and ultimately the entire economy grinds to a halt. That's the main cause of the spiral.

One man's debt is another mans income.

The reason we narrowly avoided full blown deflation in 2008 is because they bailed out the banks. If they didn't we would have had 1929 style depression these last 15 years.

[csomar]

Yeah people only spending money when they should be spending it is bad for the economy. Misallocation because of inflation is great. Good thing is that this system is close to collapse.

[csomar]

I think peak propaganda and manipulation was convincing people that inflation is good for the economy and therefore for them. Imagine prices constantly dropping and your money buys more than ever, uhm, like the deflation happening in tech. That would be very bad for the economy. The irony is that the best performing sector has been the one deflating the most.

[victorbjorklund]

Much of real estate in china is not liveable. They are cheaply built projects without any infrastructure or people living in it.

[kayewiggin]

here's a video of a Chinese family living on the 16th floor of a rotten tail building (unfinished building) with no running water or electricity.

https://www.youtube.com/watch?v=ZjaE8mDbq68