There are literally zero example of deflation causing drops in consumer spending. Invariably the increase in real income caused by lower price level has a stronger effect on increasing consumption than any temporal substitution effect that might cause people to delay consumption in anticipation of lower prices. Also, you can compensate for the temporal substitution effect by lowering interest rates
What you have are examples of falling incomes causing drops in consumer spending
Consumption dropped because incomes dropped, not because consumer prices dropped. Income dropped because of, inter alia, collapses in agriculture, collapses in trade largely attributable to smoot-hawley tariffs, and collapses in the money supply caused by 10,000 bank failures (itself compounded by falling incomes - especially falling income:asset ratios which compounded the losses of farm loan defaults and margin call defaults (caused by stock market crash) and inaction of the Fed, failing to inject liquidity when it was needed).
Deflation didn't cause those things. Deflation was caused by those things
None of that applied to the rich people in the depression, who were hoarding money and gold. FDR literally issued an executive order confiscating the private gold reserves in the country as a measure to reintroduce liquidity into the economy.
Yes and? Rich people didn't consume less because they were waiting for things to get cheaper. To the extent they consumed less, it was because their own incomes were down
Yes, FDR confiscated the gold in 1933 as part of measures to increase the money supply, which was part of other measures that helped end the banking crisis. Prior to that though, the Fed was fucking dog by, among other things, increasing rates
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u/UmpireDapper1757 7h ago edited 7h ago
There are literally zero example of deflation causing drops in consumer spending. Invariably the increase in real income caused by lower price level has a stronger effect on increasing consumption than any temporal substitution effect that might cause people to delay consumption in anticipation of lower prices. Also, you can compensate for the temporal substitution effect by lowering interest rates
What you have are examples of falling incomes causing drops in consumer spending