If things get cheaper, then company/store selling said things receives less money for the same sales, meaning they have to either fire employees or reduce wages.
If this continues to happen, you get a deflation spiral, which is actually much harder to fix for the government than an inflation spiral.
First off, you're thinking in terms of assets, not products.
It's not just the gold that is worth less; it's everything except your dollar bill.
If you work at the widget store, widgets went from $1 each to $0.90. Widgets aren't an appreciating asset, they're just a thing people use. If you sell 100/day it's maybe becauss people only use 100/day. Plus, in a few weeks they'll be $0.80. People have no use for more, and they're only worth less each passing day, so while yes, you could buy the dip and be king of the widgets, you're just sitting on a pile of useless junk.
Some assets, like gold or stocks, are in fact on sale and will be useful again when prices rebound. But what are you buying them with? You used to make $100/day as your cut of selling widgets, and now, you only make $90/day, and next week you'll be making $80/day. Are you going to justify buying the dip when your income gets smaller by the day and the dip is nowhere near rock bottom?
What happens is people focus their budgets on necessities, buy fewer other products, those products get cheaper due to lowered demand, companies slash wages and go under, and the cycle feeds itself.
Holy hell, are you really that dense? Just read the comment I posted. It is literally an answer to the question you asked. If you're too lazy or illiterate to read 200 words, there's really nothing I can do to help you.
As should be clear from that comment, the answer is no, I would not buy gold during deflation, and the explanation for why is also in the comment. I really can't make it any clearer, and I'm not sure what you want from me other than to waste my time with inane questions.
No. I would not. In a deflationary spiral, not only would the price of gold be lower, everyone would have less money to buy things with. When you have no money, you can't spend it on buying gold. Therefore, I would not buy gold because I would not have the money to buy gold.
Are you satisfied? Maybe it would help if I asked what specifically about my answer is confusing or seems like an evasion, since I've explicitly answered it with a "no" twice now.
Edit: since I look like an asshole, I would like to note that the comment this is replying to has edited itself. It originally asked me, yet again, to answer the question and explain, and has now changed to a thank you, asking why answering was so hard for me.
Deflation isn't just gold going down in price. It's everything. Deflation is the increase in the value of the dollar. Which sounds good because it seems like you'd be able to buy more stuff, but it's not because it means you would also have fewer dollars overall, for the reasons I described.
This tends to feed back on itself and create a situation that is very hard for a country to escape. It's what caused the Great Depression. You're essentially asking why people didn't just buy the dip during the Great Depression when the entire world's stock market was 50% off. It's because they didn't have any money, and what money they did have went straight to necessities.
118
u/Terpcheeserosin 8h ago
Why does things costing less make people buy less?
If wages stay the same, shouldnt people just buy the dip?