Talk:Deflation

This article is incompetent

Was this article about Deflation as well as the one about Inflation written by a student of Ben Bernanke? If so it is completely off as are the academic theories of Mr Bernanke. His theories are biting dust when faced with reality and particularly the Deflationary one. References to some books that are wrong don't make this article right. Deflation is about monetary base, not prices. The whole article is about CPI, not deflation.

Uh... "Deflation is about monetary base, not prices."

How many macroecon courses have you taken, exactly? Your statement is absurd. But Ron Paul would agree with you... (of course, he's never taken an economics class either). 67.211.130.184 (talk) 08:59, 8 January 2009 (UTC)

Who writes text books for those macroecon courses?

It's absurd? I take it nothing affects the price of consumer products except inflation and deflation? For the record, Ron Paul is simply echoing the philosophy of Ludwig von Mises and the "Austrian School" of economics. There are many modern economists that share his view. 66.215.216.61 (talk) 22:40, 24 April 2009 (UTC)

Well, then fix it:-) You won´t get far discrediting the whole of Bernanke. But, good luck. I also find some aspects of current economic and accounting theory and practice completely wrong. I think we are all open to open discussion. PennySeven (talk) 23:56, 31 December 2008 (UTC)

When I fix it, some robot reverts my edits. Happy New Year to you as well.

You start from a weak position not being willing to sign your contributions:-) PennySeven (talk) 23:59, 31 December 2008 (UTC)

Irony, FTW "—Preceding unsigned comment added by PennySeven (talk • contribs) 00:01, 1 January 2009 (UTC)" 66.215.216.61 (talk) 22:40, 24 April 2009 (UTC)

Happy new year :-) PennySeven (talk) 00:08, 1 January 2009 (UTC)—Preceding unsigned comment added by PennySeven (talk • contribs) 00:01, 1 January 2009 (UTC)

People do get it wrong, sometimes. Milton Friedman’s assertion that “inflation is always and everywhere a monetary phenomenon” is currently being hauled out with the rest of the trash. First-half 2009 US nominal GDP -1.9%, CPI -0.5%, M1 up 14.9%, M2 +9.1%, MZM +11.3% . . . doesn’t add up. DOR (HK) (talk) 04:19, 23 September 2009 (UTC)

The velocity of money can also change. See the equation of exchange: $M\cdot V=P\cdot Q\,.$ JRSpriggs (talk) 08:55, 24 September 2009 (UTC)

In addition, it's worth noting that changes in the money supply rarely manifest themselves in aggregate price changes for any less than 12-15 months and potentially longer. Quantitative easing has begun to have an effect on the US economy, in line with the introduction of anti-inflationary monetary policy introduced back in 2008. The effects of Obama's monetary policy on prices in order to address the problem of inflation will become apparent in 2010 as the US cleanly escapes the deflation nightmare. It's highly unlikely that monetary policy in the early years of the Obama administration could be having an impact on prices yet; what is more plausible is that money supply increases in 2008 are beginning to counteract the deflationary effect of the credit crunch.Pragmatism24 (talk) 15:48, 5 November 2009 (UTC)

This article is not only incompetent, it assumes a Keynesian bias from the beginning. Some honest soul might undertake to separate out the Keynesian understanding from the Austrian one as exemplified by the Rothbard chapter listed at the bottom. —Preceding unsigned comment added by 71.241.232.106 (talk) 16:14, 3 July 2010 (UTC)

Yes, unfortunately, this appearance of incompetence is unavoidable due to a number of wiki policies which are often robotically/unthinkingly applied by various editors. As is typically the case in the space of articles on political economy, the assumption of the capitalist/bourgeois perspective as a universal obtaining currently and in perpetuity except in those backward areas it has yet to conquer blocks exposition of the phenomenon for the simple epi-phenomenon that it is, an artifact of the capitalist mode of production. In a system of money based strictly on accounting and an assignment of prices based on that accounting instead of the capitalist market there would be neither inflation nor deflation but computed price/costs with whatever mathematical accuracy the method of computation provided. This kind of elemental reasoning can't make it into main space for the aforementioned reason(s). 72.228.177.92 (talk) 17:42, 4 August 2010 (UTC)

Socialism versus Capitalism

To 72.228.177.92: Having prices imposed from above by a robotic planning agency (instead of being agreed upon by the seller and buyer) inevitably results in massive waste and widespread shortages. This is seen in every socialist or communist state which has ever existed. JRSpriggs (talk) 10:05, 7 August 2010 (UTC)

Including the PRC? Your opinions appear superficial and ill-considered but this is a public forum and I want to give you a chance to appear intellectually competent to discuss this matter. Planning as opposed to not planning can be discussed in a rational and informed manner without falling back on canards and ignorant presuppositions which are contrary to reason (i.e. that planning is inherently more inefficient, purposeless, robotic, whatever than not-planning). My entrance to this discussion was to explain an inevitable appearance of incompetence in the exposition of the subject in the article due to thinking within a narrow mindset which you have so admirably illustrated. "It is glorious to get rich", all the more so in a presumptive workers state. Less so perhaps in an ossified, moron dominated, plutocracy. In my thinking, "buyer" should mean society and seller should mean the individual. Then not having some rational framework for setting prices, allocation of production, determination of what to produce, etc. is as unthinkable to you as is my conception of the buyer and seller relations in planned production. 72.228.177.92 (talk) 14:46, 12 August 2010 (UTC)

Before PRC discarded most aspects of socialism, it also suffered from extensive waste and shortages. Only after they allowed private ownership of the means of production and removed price controls did they begin to grow rapidly.

The issue is not: planning versus no planning. The issue is: centralized planning by a few people ignorant of the facts versus dispersed planning by billions of people who know with what they are dealing because it is what they work on every day. Socialism begins by wasting the minds of the vast majority of people by effectively excluding them from the decision making processes. This is all explained in the writings of the Austrian school of economics.

As for your suggestion that "society" (i.e. the government) should act as a monopsony (exlusive buyer), this disregards the fact the only the consumers individually know what they really need. And it also disregards the fact that consumption and production cannot be separated without creating a moral hazard which would destroy the ability to produce. JRSpriggs (talk) 17:14, 12 August 2010 (UTC)

There would be no point in replying specifically point by point, but acknowledging your various regurgitations of your understanding of concepts like "socialism" and your confusion and conflation of a number of concepts, but I do want to stress that the totality of consumers is society, the whole set of buyers, who may should they reach a sufficient level of consciousness, act in concert. "Governments", i.e. nation states, are institutions set up to defend the order whose cant you are parroting. Lycurgus (talk) 17:44, 12 August 2010 (UTC)

Please stop insulting me. Personal attacks are prohibited by WP:Civil.

If you restate your argument in a civil way, then I will answer it. JRSpriggs (talk) 12:05, 13 August 2010 (UTC)

Je suis fatigue. As I said there would be little point. User:Lycurgus/POV (expand/show) "terrestrial political perspective" for my take on what you've newly titled this subthread. 72.228.177.92 (talk) 14:10, 13 August 2010 (UTC)

Yes, I am also tired. Tired of those who think they know everything when they know next to nothing. A deus. JRSpriggs (talk) 18:40, 13 August 2010 (UTC)

FTR, I don't concur with any implications this editor makes in the subthread retitling except to the extent that "socialism" would be defined as the retraction of the general world view, the kind of the assumptions and presuppositions he makes. Fortunately I did not look at anything personal about him until now and based my replies only on text here as I might have been disposed to give greater credit for his opinions in this based on his main profession. Rather, I contrast the bourgeois/capitalist perspective with a general consideration of political economy from first principles, a larger perspective than for example Marxism and my definition of the terms in question has been noted/linked. This is the kind of perspective which would be required for a highest quality encyclopaedic treatment of the subject, my original point. Pealing back layers of received culture to examine a subject isn't really OR but it's often perceived as such, to anticipate the other likely (and contextually valid) objection to an examination of this article's subject from 1st principles. 72.228.177.92 (talk) 12:06, 14 August 2010 (UTC)

Should we have a section on "Deflationary spiral"?

On 9 April 2009, Michael93555 (talk · contribs) removed a section titled "Deflationary spiral", saying "→Deflationary spiral: NO references or sources.". The section said:

A deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. Since reductions in general price level are called deflation, a deflationary spiral is when reductions in price lead to a vicious circle, where a problem exacerbates its own cause. The Great Depression was regarded as a deflationary spiral.

A deflationary spiral is the modern macroeconomic version of the general glut controversy of the 19th century.

Michael is correct that there were no references; and personally, I doubt that such a phenomenon can actually occur. However, there are many links to this section; obviously many people believe in it or at least want to talk about it (if only to reject it). So should we have a section on it anyway? JRSpriggs (talk) 12:06, 24 June 2009 (UTC)

I support a section on "Deflationary spiral". In my opinion the easiest would be to google for references on the subject and replace the section with the reference(s).

Deflation is even less understood than inflation. We will only find the correct way to describe it when we keep on trying. It is a noteworthy subject. PennySeven (talk) 21:12, 24 June 2009 (UTC)

I too would be interested to see such a section. While on the one hand deflation can discourage spending due to higher unemployment, higher savings rates in proportion to price rises etc., there are also strong incentives towards spending during a deflationary period due to lower prices. I imagine things get even more complicated when you throw credit and lending rates into the mix.Pragmatism24 (talk) 15:52, 5 November 2009 (UTC)

On 25 June 2009, I restored the section Deflation#Deflationary spiral with some changes. Perhaps I should have mentioned that earlier. JRSpriggs (talk) 18:24, 7 November 2009 (UTC)

On ``a slow-down in the inflation rate (i.e. when the inflation decreases, but still remains positive)

There is a problem with this phrase in defining "disinflation" within this deflation article. I take slow-down to mean "decreasing". However, if the rate of something decreases, that does not mean that the quantity will decrease. It is like acceleration is the rate of change of velocity. Just because the acceleration is negative does not mean that position will be negative. —Preceding unsigned comment added by Cihan (talk • contribs) 23:02, 4 October 2009 (UTC)

That is the point which the article is trying to make. Having disinflation (a slow down in inflation) at a certain time does not imply that one has or will have deflation. And having deflation does not necessarily mean that one is currently disinflating.

However, if one has inflation at one time and deflation later, then some disinflation must have occurred in between, but not necessarily for the entire interval. JRSpriggs (talk) 13:26, 6 October 2009 (UTC)

Deflation bad?

The perspective taken by this article suggests that deflation is always a bad thing, but what about deflation due to productivity gains? Nothing wrong with that, is there???????????

--206.248.176.147 (talk) 01:20, 5 May 2010 (UTC)

If deflation is a result of growth in the private sector combined with self-restraint in monetary and fiscal policy by the government, then I think that it is good, indeed highly desirable. However, most economists (at least those favored by the government) think that deflation is very dangerous. This article reflects that "mainstream" point of view. See User talk:Lawrencekhoo/Archive 4#Effects of deflation for my discussion with an academic economist on this point. JRSpriggs (talk) 03:55, 5 May 2010 (UTC)

Deflation is always bad because of Historical Cost Accounting, namely the stable meausuring unit assumption, i.e. Japanese accountants assume and all Historical Cost accountants would simply assume that there is no deflation, never was and never willl be: they simply assume money is perfectly stable as far as the valuation of constant real value non-monetary items, e.g. companies´ capital and retained profits are concerned exactly the same way as HC accountants simply assume there is no inflation for the same purpose.

Historical Cost accountants´ stable measuring unit assumption it the second enemy in the economy (besides deflation or inflation), but, it is a stealth enemy: it is camouflaged by authorization in International Financial Reporting Standards which state in the Framework, Par 104 (a) "Financial capital maintenance can be measured in either nominal monetary units or in units of constant purchasing power." The second part to the same statement supplies the only and perfect solution, namely, financial capital maintenance in units of constant purchasing power.

Japan is at war with deflation for the last 15 years or more. Japan´s accountants implement the 700 year old generally accepted traditional Historical Cost Accounting model: like the rest of the world - supposedly excluding Venezuela which is in hyperinflation. However nothing can be further from the truth in Venezuela: they still implement HCA - during hyperinflation!!

Back to Japan´s deflation: CNN ran a story of a social website that allows Japanese housewives to almost always buy the lowest price groceries in their area thus driving down prices even more and increasing the deflationary pressure.

Where is the imperfection in the market and what would the perfect market solution in Japan be?

The imperfection in the market is the Historical Cost Accounting model: the Japanese Yen is in deflation. Thus, accounting non-monetary items at their historical costs, i.e. implementing the stable measuring unit assumption meaning Japanese accountants assume there is no deflation in Japan – instead of lowering all non-monetary item values to reflect the increase in the real value of the Yen, maintains the deflation the Bank of Japan is unable to stop because constant real value non-monetary items never updated (decreased in nominal value during deflation to maintain their constant real values constant) are treated like monetary items (cash) by Japanese accountants: thus, their real values increase all the time during deflation.

Deflation creates more real value in money, the Yen, in Japan – because of the monetary nature of money. (Don´t laugh at the expression: it is correct.) :-)

When Japanese accountants stop measuring financial capital maintenance in nominal monetary units, i.e. when they abandon the traditional Historical Cost Accounting model and with it the dreaded stable measuring unit assumption, they will adjust all constant real value non-monetary items´ nominal values with deflation: they will automatically lower the nominal values of salaries - for example, but, the real value of the salaries will remain the same because of deflation in the Yen: it is increasing in real value all the time.

That means that Japanese consumers would stop to gain from delaying their consumption while they wait for deflation to automatically increase the real value of their salaries. The Japanese real or non-monetary economy would stabilise as all non-monetary items would see their values adjusted downwards evenly in the non-monetary or real economy. That would stop deflation.

This cannot happen automatically while Japanese accountants measure financial capital maintenance in nominal monetary units as they have been authorized to do in IFRS in the Framework, Par 104 (a) in 1989. The only way Japanese accountants can stop treating constant real value non-monetary items, e.g. the capital and retained profits of all Japanese companies, like money during deflation, is with financial capital maintenance in constant purchasing power units as they have been authorized in IFRS in the same Framework, Par 104 (a) in 1989. —Preceding unsigned comment added by 93.108.18.28 (talk) 00:00, 16 May 2010 (UTC)

"citation needed" tags

I have undone the addition of many "citation needed" templates by three sock puppets of banned User:PennySeven, namely: User:NapoleanTheGreat, User:Sallie Little, and User:A bunch of red roses.

If no one replaces the remaining templates by references between now and Tuesday morning next (May 18, 2010), I will conclude that no one intends to provide references. In that case, I will feel free to remove or change the tagged clauses at my discretion. If you object to this procedure, then say so here and now. JRSpriggs (talk) 06:26, 14 May 2010 (UTC)

No references were added by my deadline, so I removed or modified some of the tagged clauses. I was removing things which I thought were false or very dubious. Others may wish to deal with the remaining citation needed tags. JRSpriggs (talk) 07:43, 19 May 2010 (UTC)

How does deflation affect bank savings?

Under effects of deflation- Just check: Deflation discourages or encourages bank savings? —Preceding unsigned comment added by 202.166.87.174 (talk) 15:16, 19 July 2010 (UTC)

The article says that deflation "Discourages bank savings and decreases investment". The key question is <<relative to what?>>. Indeed bank savings are discouraged relative to holding cash (in a wallet, in a wall safe, or in a mattress) because nominal interest rates paid by bank accounts are normally lower during deflation and the risk of default (bank runs) is higher. On the other hand, bank savings probably look more attractive relative to investing in a business or buying a durable good (e.g. a car, refrigerator, or washing machine). But cash is the proper thing to which to compare. JRSpriggs (talk) 07:39, 20 July 2010 (UTC)

Bias.

I added a bias tag in order to call attention to the very strong bias toward keynesian economic ideology and words used as moral judgements rather than description of economic processes.174.101.49.64 (talk) 02:58, 18 September 2010 (UTC)