That's just not what happens. There's no evidence that deflation reduces consumers' propensity to spend (probably because decreases in the price of consumer goods increase consumers' real incomes, offsetting the effect). Nor is there evidence that inflation increases consumers' propensity to spend (this is likely because increases in the price of consumer goods reduce consumers' real incomes, offsetting the effect)
That's not what happens. If people were willing and able to defer consumption to when things got cheaper, nobody would have bought any electronics for the last 70 years and nobody would ever have high interest consumer debt
It's a myth that deflation causes material drops in consumer spending. The inverse is what's true: drops in consumer spending cause deflation, as producers are forced to lower prices to move inventory that people stopped buying
Not all goods are created equal, especially larger purchases.
I agree that consumer spending causes deflation. All my examples have been from the consumer's point of view. But it can also be cyclical. Pressure on companies can put pressure on employees who are also consumers.
True that not all goods are crated equal. Larger purchases (also durable and inventoriable goods) are the best candidates for temporal substitution, and they're also the most sensitive to interest rates.
Which is to say that most other goods and services are very insensitive to temporal substitution, which makes hand-wringing about deflation caused by price drops of those goods misguided at best
To say nothing of the fact that falling demand can only be economically problematic as it pertains to domestically-produced and consumed goods. There are zero negative effects of falling import prices (and if there were, tariffs would solve them). And falling domestic prices of export goods are simply irrelevant, by definition - actually deflation tends to be excellent for exporters because their costs tend to go down while their revenues are unaffected.
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u/UmpireDapper1757 8h ago
That's just not what happens. There's no evidence that deflation reduces consumers' propensity to spend (probably because decreases in the price of consumer goods increase consumers' real incomes, offsetting the effect). Nor is there evidence that inflation increases consumers' propensity to spend (this is likely because increases in the price of consumer goods reduce consumers' real incomes, offsetting the effect)