Who is going to buy a product today if it’s going to be cheaper tomorrow? Only the people who absolutely can’t do without, and there is not that many of them. Consumerism is the driving force of all modern economies, and it’s partly driven by the fact that waiting to buy something is just going to drive its price up because of inflation. That’s why a lot of people would rather buy on credit than save for a purchase.
I apologise for making a practical example in the hopes that it would make it easier to understand why deflation is bad for anyone who’s indebted.
You are, as evidenced by the very phone or computer you’re using read this right now. This device has gotten cheaper over time and will continue to get cheaper over time, yet you bought one anyway.
Regarding debt spirals, I don’t have much insight there other than to say it is a crushing thing when currency deflates, so I mostly agree with you on this point.
This device has gotten cheaper over time and will continue to get cheaper over time
That’s why I always tried to make do with bottom-of-the-market hardware. Boy is it working wonders now that prices have quadrupled. See? If I had known AI would have fucked over prices, I would actually have bought those 64/128 GB of RAM when I built my setup, instead of squeezing by on 32.
Using ephemeral inflationary deviations is an odd way to drive your point. Prices in technology will continue to drop, AIs influence on tech prices won’t last forever. The point remains that your phone and computer today will have been cheaper to purchase if you waited until tomorrow. Maybe not literally tomorrow because of AI, but eventually. And if you still disagree, then fine, use TVs instead, or any other good which has shown itself to be deflationary over time but not impacted by the effects of AI.
You buy bottom of the market hardware, that’s fine. The point still stands even there, because even that hardware gets cheaper over time, yet you bought it anyway. You can argue that if it weren’t deflating you would be more inclined to buy more expensive hardware, and I don’t really have any thoughts on that. I think the quality/tier of what you buy should be dictated by your financial situation and discipline rather than these economic factors. Like inflation leads to massive borrowing by a lot of folks, but we say that tends to be okay because inflation lessens the impact of that borrowing over time. Whereas conversely, deflation worsens the impact because it makes your debts deeper as the currency deflates. So people say “see? Can’t even borrow money with deflation.” But I think that line of thinking is exactly wrong, being able to borrow is something that should only be used when absolutely necessary, not to finance every last thing like a door dash order. Financial discipline is what should be used to purchase things in a deflationary environment, really any environment, not debt.
What about house? You expect me to buy a house without borrowing? In a deflationary economy? Honestly yes. The fact mortgages are so common I think is evidence of how pervasive inflation has become. Nobody realistically tries to buy a house, we just mortgage it now, which is short selling our future selves. In a deflationary economy where your cash gains value over time, saving actually means something and actually meaningfully grows. I think buying houses outright would be far more common in such an economy. But true, borrowing would still have to be a thing as well. Maybe it would be more common to see people put large down payments on houses in such an economy. Idk I’m rambling now, this went on longer than expected, I just think we often look at the idea of a deflationary economy through the lens of our inflationary world and assert “well that can’t work, I can’t even borrow money.” The point is, you should almost never need to borrow money in a deflationary economy, provided you exercise the smallest amount of financial discipline properly.
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u/LvdT88 8h ago
Who is going to buy a product today if it’s going to be cheaper tomorrow? Only the people who absolutely can’t do without, and there is not that many of them. Consumerism is the driving force of all modern economies, and it’s partly driven by the fact that waiting to buy something is just going to drive its price up because of inflation. That’s why a lot of people would rather buy on credit than save for a purchase.
I apologise for making a practical example in the hopes that it would make it easier to understand why deflation is bad for anyone who’s indebted.