February 16, 2015

WHEN RISING STANDARDS OF LIVING ARE THE GREATEST "CRISIS" YOUR SOCIETY FACES...:

What would happen if prices started going down? (Colm O'Regan, 2/16/15, BBC)

The presence of deflation feels weird to us. Part of the human condition is to expect that the price of everything has gone up. It's like old age and the weather. Nothing can be done about it but it's a topic for small-talk. We have no natural expectation of prices dropping.

The notion that prices fall feels like time itself is being reversed. There'll be old people talking wistfully about a time when things were more expensive and young people being nostalgic for the future.

Maybe one solution to deflation is for everyone to stop talking about it. That way, consumers would just go on living their lives rather than waiting for some sort of never-ending January Sales Of Life. Or, in keeping with the sales metaphor, get the message out there that, while yes prices are going to drop, if you keep waiting to buy they won't have it in your size. This is known in economics as the "Out of Mediums, just XXXL left Conundrum".

A large component of prices falls has been the drop in the price of oil. AND?! What's so wrong with that? Do people delay buying petrol in the hope the price will drop? If that's the only thing, then is the deflation meaningful at all?

Posted by at February 16, 2015 10:00 AM
  

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