tee-rex : savings are good, consuming on credit is bad
What about savings versus direct consumption? Which one is better? You won't get away with this question so easily.
Topic: Global Financial Crisis scenarios - page 13. (Read 15914 times)
What about savings versus direct consumption? Which one is better? You won't get away with this question so easily.
Quote
At least in the US, this is simply not true. During the 2008 crisis, everything turned negative, including retail sales (see this chart: http://www.macrotrends.net/1371/retail-sales-historical-chart). US consumers bought less in 2008 and 2009 than they did in 2007, despite any reduction in prices.
Globally the US didn't have deflation Government computed inflation (therefore minimised) :
2008 3.8%
2009 -0.4%
2010 1.6%
If inflation was -0.4% in 2009, how was that not deflation? If you want a better example of how bad deflation can be, look at the first part of the Great Depression.
1929 0.0%
1930 -2.3%
1931 -9.0%
1932 -9.9%
1933 -5.1%
after 1933 it turns positive again for a few years
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And btw, there's still some risk in money market securities. We haven't seen a crisis bad enough to really jeopardize the money markets, but it's possible.
It did jeopardize the money markets in 2008 but the government intervenes and guaranteed the funds, they double the bet once again and got lucky, remember?
Yes, that's a better way of putting it. Thank you.
Quote
The US has been printing money at an insane rate the past several years, and it's worked so far, but it can't go on forever.
Quote
No amount of money printing will be able to save the situation.
YES
Quote
If that happens in a disorderly, crisis-like fashion, the whole world is screwed.
Disagree here, most if not all countries will suffer at first but it will be great for hard working countries with natural ressources low taxes and regulation and high saving rate
I suppose it would be possible for such countries to do ok, but there aren't many countries like that (can you think of some examples?), and they would have to be very isolated from the global economy. Usually countries with strong economic growth and a good industrial base (e.g., China) are exporters. If a significant portion of a country's economy depends on demand for their exports, they get screwed during a global crisis because no one has the money to buy their exports anymore.
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You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.
Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!
This doesn't have to do with desire. This has to do with capability. There were some good price breaks/sales during the 2008 crisis. I would have loved to have taken advantage of them, but I couldn't because I was unemployed for a couple months at the beginning of 2008. As a result, my family and I didn't have extra money to spend on cheaper products. The whole reason they're cheaper in the first place is that fewer people can afford them.
Prices going down were the only good thing in the Great D, do you think prices going up would have been better for people having very limited ressources?
People have less money in depression times so it is good that prices are lower not higher
China will fair well after the USD collapsed and the dust has settled
tee-rex : savings are good, consuming on credit is bad
slimus : the bubbles arrived because the FED created them with low interest rates, when Greenspan increased the interest rates it was the solution to get a much needed crisis to eliminate the bad debt but they decided to re-inflate bubbles because they care about the present not the future
Quote
You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.
Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!
You seem to be missing the whole point. It is not a question of buying less, it is a question of saving more! When prices go down, people (me included) don't necessarily buy less, but they do save more shrinking from additional expenditures and consumption that you would expect from the fallen prices. And this has been known since long ago (and written in the textbooks, by the way).
And this is enough to cause negative or even devastating effects on the economy.
Read your message twice but am still not sure if it's a joke or not : if you buy as much and you save more it is a bad thing?
If you think it a joke, I don't think we're going anywhere, sorry. Additional savings due to prices falling reduce producers' profits. This can only be compensated by expanded consumption (provided all other things being equal), but as I said before, increased saving evidently holds back this.
And consumption is an investment by itself, but saving postpones it, so that you can't have it both ways, whether you like it or not.
Consumption is not an investment and do you prefer a nation of consumers and borrowers with a weak economy or a nation of producers and savers?
Saving didn't hold the States of becoming the first economy; going into debt to consume will make them fall of the most wanted first place
Prefer the latter; the USA was the latter, enjoyed many liberties, low taxes and small government and that is what made this nation so great; now they have consumers, debts, unfunded liabilities and they produce less and less; it will only be justice when the hard workers and savers of this world like chinese will enjoy wealth, consumption and a strong currency
If so, then how people are going to invest later according to your own words, that is "savings are good because they will be reinvested"?
And as I understand, now you don't deny that savings will increase even if prices are falling, right?
Consumption is not an investment and do you prefer a nation of consumers and borrowers with a weak economy or a nation of producers and savers?
Saving didn't hold the States of becoming the first economy; going into debt to consume will make them fall of the most wanted first place
Prefer the latter; the USA was the latter, enjoyed many liberties, low taxes and small government and that is what made this nation so great; now they have consumers, debts, unfunded liabilities and they produce less and less; it will only be justice when the hard workers and savers of this world like chinese will enjoy wealth, consumption and a strong currency
Saving didn't hold the States of becoming the first economy; going into debt to consume will make them fall of the most wanted first place
Prefer the latter; the USA was the latter, enjoyed many liberties, low taxes and small government and that is what made this nation so great; now they have consumers, debts, unfunded liabilities and they produce less and less; it will only be justice when the hard workers and savers of this world like chinese will enjoy wealth, consumption and a strong currency
This doesn't have to do with preference or what's better in the long run. I, too, would prefer a more stable system that's full of producers and savers. But the fact is that credit and consumption drive economic growth faster and "easier"--they are shortcuts to greater wealth. And with today's prevalent instant gratification attitude, that's the path most people pick. It's a lot easier to take out a loan and get that shiny new car now than it is to work hard, save for it, and pay cash later.
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At least in the US, this is simply not true. During the 2008 crisis, everything turned negative, including retail sales (see this chart: http://www.macrotrends.net/1371/retail-sales-historical-chart). US consumers bought less in 2008 and 2009 than they did in 2007, despite any reduction in prices.
Globally the US didn't have deflation Government computed inflation (therefore minimised) :
2008 3.8%
2009 -0.4%
2010 1.6%
If inflation was -0.4% in 2009, how was that not deflation? If you want a better example of how bad deflation can be, look at the first part of the Great Depression.
1929 0.0%
1930 -2.3%
1931 -9.0%
1932 -9.9%
1933 -5.1%
after 1933 it turns positive again for a few years
Quote
And btw, there's still some risk in money market securities. We haven't seen a crisis bad enough to really jeopardize the money markets, but it's possible.
It did jeopardize the money markets in 2008 but the government intervenes and guaranteed the funds, they double the bet once again and got lucky, remember?
Yes, that's a better way of putting it. Thank you.
Quote
The US has been printing money at an insane rate the past several years, and it's worked so far, but it can't go on forever.
Quote
No amount of money printing will be able to save the situation.
YES
Quote
If that happens in a disorderly, crisis-like fashion, the whole world is screwed.
Disagree here, most if not all countries will suffer at first but it will be great for hard working countries with natural ressources low taxes and regulation and high saving rate
I suppose it would be possible for such countries to do ok, but there aren't many countries like that (can you think of some examples?), and they would have to be very isolated from the global economy. Usually countries with strong economic growth and a good industrial base (e.g., China) are exporters. If a significant portion of a country's economy depends on demand for their exports, they get screwed during a global crisis because no one has the money to buy their exports anymore.
Quote
You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.
Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!
This doesn't have to do with desire. This has to do with capability. There were some good price breaks/sales during the 2008 crisis. I would have loved to have taken advantage of them, but I couldn't because I was unemployed for a couple months at the beginning of 2008. As a result, my family and I didn't have extra money to spend on cheaper products. The whole reason they're cheaper in the first place is that fewer people can afford them.
Hi,
I have a question, but please direct me to a post if already asked:
In case of another GFC, would BTC bitcoin price:
a) stays on the same level
b) skyrockets
c) tumble down
?
I have a question, but please direct me to a post if already asked:
In case of another GFC, would BTC bitcoin price:
a) stays on the same level
b) skyrockets
c) tumble down
?
In a case of global financial crise, as the 2008 one, the price of each and every financial asset and commodities will go down (oil will go down, stocks, precious metal, and also bitcoin). In such a scenario the only safe haven will be cash and money market securities. (all the rest will crash)
However government will never let it happen, and they are ready to print even more in order to avoid this situation.
Gold went up from the dotcom bubble explosion to 2012; if we see hyper inflation most commodities will increase in nominal terms
The crisis that is coming will not destroy all wealth, it will redistribute the cards and some will come out on top
You re right, but this happened after the the dotcom bubble explosion, when the FED decided to decrease it's interest rates. However during the crises, Gold and commodities prices went down. It was the same scenario for the 2008 crises. During the 2008 crises all prices went down (deflationary process), after the FED lunched its QE, prices started going up (inflationary process).
Quote
You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.
Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!
You seem to be missing the whole point. It is not a question of buying less, it is a question of saving more! When prices go down, people (me included) don't necessarily buy less, but they do save more shrinking from additional expenditures and consumption that you would expect from the fallen prices. And this has been known since long ago (and written in the textbooks, by the way).
And this is enough to cause negative or even devastating effects on the economy.
Read your message twice but am still not sure if it's a joke or not : if you buy as much and you save more it is a bad thing?
If you think it a joke, I don't think we're going anywhere, sorry. Additional savings due to prices falling reduce producers' profits. This can only be compensated by expanded consumption (provided all other things being equal), but as I said before, increased saving evidently holds back this.
And consumption is an investment by itself, but saving postpones it, so that you can't have it both ways, whether you like it or not.
Consumption is not an investment and do you prefer a nation of consumers and borrowers with a weak economy or a nation of producers and savers?
Saving didn't hold the States of becoming the first economy; going into debt to consume will make them fall of the most wanted first place
Prefer the latter; the USA was the latter, enjoyed many liberties, low taxes and small government and that is what made this nation so great; now they have consumers, debts, unfunded liabilities and they produce less and less; it will only be justice when the hard workers and savers of this world like chinese will enjoy wealth, consumption and a strong currency
I see the problem here. You are looking at it from a micro point of view. But we are talking about macro
Quote
You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.
Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!
You seem to be missing the whole point. It is not a question of buying less, it is a question of saving more! When prices go down, people (me included) don't necessarily buy less, but they do save more shrinking from additional expenditures and consumption that you would expect from the fallen prices. And this has been known since long ago (and written in the textbooks, by the way).
And this is enough to cause negative or even devastating effects on the economy.
Read your message twice but am still not sure if it's a joke or not : if you buy as much and you save more it is a bad thing?
If you think it a joke, I don't think we're going anywhere, sorry. Additional savings due to prices falling reduce producers' profits. This can only be compensated by expanded consumption (provided all other things being equal), but as I said before, increased saving evidently holds back this.
And consumption is an investment by itself, but saving postpones it, so that you can't have it both ways, whether you like it or not.
Consumption is not an investment and do you prefer a nation of consumers and borrowers with a weak economy or a nation of producers and savers?
Saving didn't hold the States of becoming the first economy; going into debt to consume will make them fall of the most wanted first place
Prefer the latter; the USA was the latter, enjoyed many liberties, low taxes and small government and that is what made this nation so great; now they have consumers, debts, unfunded liabilities and they produce less and less; it will only be justice when the hard workers and savers of this world like chinese will enjoy wealth, consumption and a strong currency
Quote
You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.
Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!
You seem to be missing the whole point. It is not a question of buying less, it is a question of saving more! When prices go down, people (me included) don't necessarily buy less, but they do save more shrinking from additional expenditures and consumption that you would expect from the fallen prices. And this has been known since long ago (and written in the textbooks, by the way).
And this is enough to cause negative or even devastating effects on the economy.
Read your message twice but am still not sure if it's a joke or not : if you buy as much and you save more it is a bad thing?
If you think it a joke, I don't think we're going anywhere, sorry. Additional savings due to prices falling reduce producers' profits. This can only be compensated by expanded consumption (provided all other things being equal), but as I said before, increased saving evidently holds back this.
And consumption is an investment by itself, but saving postpones it, so that you can't have it both ways, whether you like it or not.
Could go either way but if fiat is worthless, I don't know how people will get bitcoins. Other than mining, I guess maybe by selling something on a BTC ebay market, or performing work for someone who pays in BTC.
Quote
You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.
Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!
You seem to be missing the whole point. It is not a question of buying less, it is a question of saving more! When prices go down, people (me included) don't necessarily buy less, but they do save more shrinking from additional expenditures and consumption that you would expect from the fallen prices. And this has been known since long ago (and written in the textbooks, by the way).
And this is enough to cause negative or even devastating effects on the economy.
Read your message twice but am still not sure if it's a joke or not : if you buy as much and you save more it is a bad thing?
Savings are good because they will be reinvested and will create wealth, if you can have the same things plus save more it is a win!
Quote
You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.
Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!
You seem to be missing the whole point. It is not a question of buying less, it is a question of saving more! When prices go down, people (me included) don't necessarily buy less, but they do save more shrinking from additional expenditures and consumption that you would expect from the fallen prices. And this has been known since long ago (and written in the textbooks, by the way).
And this is enough to cause negative or even devastating effects on the economy.
Quote
The unemployed will certainly do better with lower prices
We agree
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At least in the US, this is simply not true. During the 2008 crisis, everything turned negative, including retail sales (see this chart: http://www.macrotrends.net/1371/retail-sales-historical-chart). US consumers bought less in 2008 and 2009 than they did in 2007, despite any reduction in prices.
Globally the US didn't have deflation
Government computed inflation (therefore minimised) :
2008 3.8%
2009 -0.4%
2010 1.6%
They went more into debt, started QE putting more air in the real estate bubble and in the US bubble : more of the problem to solve the problem like always to avoid a necessary recession, like Bush before; Greenspan had set higher interest rates than Bernanke and that created the housing bubble!!
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Credit is a double-edged sword. You're absolutely right that it can be bad for the economy, but it does increase growth when used well. Lots of easy credit leads to spectacular busts, but it also leads to spectacular booms. The economy would be a lot more stable without it, but it would grow more slowly.
Think it would grow more
Credit is good if you get a return higher than the interest rate thus if you invest the money well
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Consumer prices are very much affected by some markets, especially the commodities.
Yes
Quote
And btw, there's still some risk in money market securities. We haven't seen a crisis bad enough to really jeopardize the money markets, but it's possible.
It did jeopardize the money markets in 2008 but the government intervenes and guaranteed the funds, they double the bet once again and got lucky, remember?
Quote
The US has been printing money at an insane rate the past several years, and it's worked so far, but it can't go on forever.
Quote
No amount of money printing will be able to save the situation.
YES
Quote
If that happens in a disorderly, crisis-like fashion, the whole world is screwed.
Disagree here, most if not all countries will suffer at first but it will be great for hard working countries with natural ressources low taxes and regulation and high saving rate
Quote
You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.
Do you buy less when the price goes down? Give me exemples of when YOU buy less when the price goes down!
Quote
Japan experienced deflation in 90s with falling prices.
They have been buying like crazy and saving like crazy as well; Japan problems don't come from deflation, you have been too long in school or you are reading Bloomberg
Prices went up recently and they consume way less now with abenomics
The prices going down are the only good thing about a crisis; nobody complains about falling prices in energy prices or electronics; restrain for consuming because prices have been a bit lower than last year and the fact that consumers anticipate lower prices thus delay their spending is a TOTAL myth : who would delay buying gas if the price goes down by 1% or even 5%? Who would delay buying gas if he thinks the price will be 1 or 5% less in a year?? Who would delay buying anything because the price went down?? You will wait a year to buy food, a haircut, clothes, a vacation because you think it will be a bit lower in a year??
When the prices go down you are happy and richer so you buy more
When the prices go down you are happy and richer so you buy more
It is not a myth. It has been proven many times through history that when prices are falling (or people get an increase in wages, which is effectively the same), they tend to save more, not spend more. If it were not so, there would be no ground for a deflation spiral...
Exactly there is no ground for a deflation spirale! People spend more when prices go down; you must have never bought anything if you don't know that : are you a politician in Washington or an Economics professor??
Being a corrupt politician in Washington or a backward professor in Chicago won't change human psychology. In this case it shows itself in what is called the marginal propensity to save, i.e. the increase in income brings about an increase in saving (the same happens when prices go down).
Increase in income brings an increase in savings but when prices are going down people buy more not less, it doesn't make sense not to buy because you think the price will be a bit lower in a year. If it was true nobody would buy on credit, when you buy on credit you are going to pay more for the product when you could wait and pay less because you would save the interests but people want the stuff they want sooner rather than later
You say what you think people should do. But I say what actually happens and has happened many times in the past. This may seem counterintuitive and working against logic, but human psychology is not about logic. And it is surely not what you think it should be.
Your example with credit actually works against your logic, by the way.
People don't buy things just because the prices go down. They buy things when they have more money.
Its psychological. Japan experienced deflation in 90s with falling prices. But when people are worried about their future they tend so save not spend
Its psychological. Japan experienced deflation in 90s with falling prices. But when people are worried about their future they tend so save not spend
In a case of global financial crise, as the 2008 one, the price of each and every financial asset and commodities will go down (oil will go down, stocks, precious metal, and also bitcoin). In such a scenario the only safe haven will be cash and money market securities. (all the rest will crash)
It's generally true that assets and commodities go down during economic crises, but that's not true all the time. In 2008, oil did crash, but only after it spiked to all-time highs. US Treasuries, because of their safe haven status, went up in value quite a lot. It just depends on where people decide to put their money. If everyone decided to pile into bitcoin during the next crisis, it could shoot up. But if people need fiat to pay their bills, bitcoin might crash if everyone cashes out.
And btw, there's still some risk in money market securities. We haven't seen a crisis bad enough to really jeopardize the money markets, but it's possible.
However government will never let it happen, and they are ready to print even more in order to avoid this situation.
This will only work as long as investors have faith in government, the world reserve banks, and that there's enough room to print more money. The US has been printing money at an insane rate the past several years, and it's worked so far, but it can't go on forever. No one knows exactly where, but there is a tipping point at which investors will seriously start to lose faith in the ability of the US to repay its debts. If that happens in a disorderly, crisis-like fashion, the whole world is screwed. No amount of money printing will be able to save the situation.
But what about all the people that lose their jobs? Where are they going to get the money to take advantage of the lower prices?
They will buy less but not because the prices went down but because they lost their jobs; the fact that the prices went down is a good thing especially for them, do you think they will be better off if the prices go up while they earn less?The unemployed will certainly do better with lower prices, but the overall loss of wages hurts a lot more than the gain from lower prices.
Let's step back for a moment. Where are you from, and what are economic crises like for you in your country/region? I live in the US where it's not uncommon for the savings rate to be negative. For a lot of people, if they lose their job for any significant amount of time, they've got nothing except for some government assistance, and are very likely to default on their debts. The 2008 crisis resulted in an increase in the US real unemployment rate (U6) of almost 10%. Additionally, many homeowners finance 80% or more of their home, and then they further borrow against what little equity they have with home equity loans and lines of credit. So when the economy turns sour, a lot of people have no money left and no way to borrow more to make it through the crisis. So it's not that the unemployed are just buying less--they're hardly buying anything.
But people shouldn't say that the consumer will consume less because the prices are going down and that he will delay his purchases because it is not true at all, only people really out of touch of the real people can say that consumers delay their purchases and consume less if the prices go down and that prices going up make happy custumers!
At least in the US, this is simply not true. During the 2008 crisis, everything turned negative, including retail sales (see this chart: http://www.macrotrends.net/1371/retail-sales-historical-chart). US consumers bought less in 2008 and 2009 than they did in 2007, despite any reduction in prices.
Consumer credit is a problem, not a solution; people going into debt to buy tvs, appliances and such (even cars) is a bad thing for the economy but maybe shouldn't go there because we were starting to agree
Credit is a double-edged sword. You're absolutely right that it can be bad for the economy, but it does increase growth when used well. Lots of easy credit leads to spectacular busts, but it also leads to spectacular booms. The economy would be a lot more stable without it, but it would grow more slowly.
Oh, and one other thing about waiting for lower prices--even if this doesn't have a large impact on some sectors of the consumer economy, it has a HUGE effect on the stock, bond, and commodity markets. While I may not care about whether I can get a TV a little cheaper a couple months from now, you bet I'm going to care if I think I can buy stocks cheaper if I wait a little while.
Interesting point but we are not talking about consumer prices anymore but prices in general there; let me think about this one a bitConsumer prices are very much affected by some markets, especially the commodities.
Hi,
I have a question, but please direct me to a post if already asked:
In case of another GFC, would BTC bitcoin price:
a) stays on the same level
b) skyrockets
c) tumble down
?
I have a question, but please direct me to a post if already asked:
In case of another GFC, would BTC bitcoin price:
a) stays on the same level
b) skyrockets
c) tumble down
?
In a case of global financial crise, as the 2008 one, the price of each and every financial asset and commodities will go down (oil will go down, stocks, precious metal, and also bitcoin). In such a scenario the only safe haven will be cash and money market securities. (all the rest will crash)
However government will never let it happen, and they are ready to print even more in order to avoid this situation.
Gold went up from the dotcom bubble explosion to 2012; if we see hyper inflation most commodities will increase in nominal terms
The crisis that is coming will not destroy all wealth, it will redistribute the cards and some will come out on top
Hi,
I have a question, but please direct me to a post if already asked:
In case of another GFC, would BTC bitcoin price:
a) stays on the same level
b) skyrockets
c) tumble down
?
I have a question, but please direct me to a post if already asked:
In case of another GFC, would BTC bitcoin price:
a) stays on the same level
b) skyrockets
c) tumble down
?
In a case of global financial crise, as the 2008 one, the price of each and every financial asset and commodities will go down (oil will go down, stocks, precious metal, and also bitcoin). In such a scenario the only safe haven will be cash and money market securities. (all the rest will crash)
However government will never let it happen, and they are ready to print even more in order to avoid this situation.
Increase in income brings an increase in savings but when prices are going down people buy more not less, it doesn't make sense not to buy because you think the price will be a bit lower in a year. If it was true nobody would buy on credit, when you buy on credit you are going to pay more for the product when you could wait and pay less because you would save the interests but people want the stuff they want sooner rather than later
Agree that in rare cases maybe people restrain from buying to have a lower price but it is the exception, not the rule; look at tv screens sells in the last ten years : people knew the prices were going down but they wanted to buy immediately on credit anyway!
When the prices go down you are happy and you can buy more and usually you will
Agree that in rare cases maybe people restrain from buying to have a lower price but it is the exception, not the rule; look at tv screens sells in the last ten years : people knew the prices were going down but they wanted to buy immediately on credit anyway!
When the prices go down you are happy and you can buy more and usually you will
But what about all the people that lose their jobs? Where are they going to get the money to take advantage of the lower prices?
They will buy less but not because the prices went down but because they lost their jobs; the fact that the prices went down is a good thing especially for them, do you think they will be better off if the prices go up while they earn less?
Increase in income brings an increase in savings but when prices are going down people buy more not less, it doesn't make sense not to buy because you think the price will be a bit lower in a year. If it was true nobody would buy on credit, when you buy on credit you are going to pay more for the product when you could wait and pay less because you would save the interests but people want the stuff they want sooner rather than later
Agree that in rare cases maybe people restrain from buying to have a lower price but it is the exception, not the rule; look at tv screens sells in the last ten years : people knew the prices were going down but they wanted to buy immediately on credit anyway!
When the prices go down you are happy and you can buy more and usually you will
Agree that in rare cases maybe people restrain from buying to have a lower price but it is the exception, not the rule; look at tv screens sells in the last ten years : people knew the prices were going down but they wanted to buy immediately on credit anyway!
When the prices go down you are happy and you can buy more and usually you will
You do bring up another very important point that was only touched on briefly in one of the above posts: credit, which is probably much more important to this discussion than fear of job loss or waiting for lower prices. I should have brought this up earlier. The world runs on credit. Without it, the world would come to a virtual standstill. During economic crises and deflation, credit dries up. Banks don't want to lend for fear of borrowers defaulting. If few people can get loans for cars and houses, that removes a lot of demand from the economy, which greatly exacerbates a deflationary death spiral.
We may be getting somewhere because agree that the deflation that comes with a crisis is happening while a lot of other bad things happen maybe the deflation will even be bad for some companies if they are force to reduce the prices (to get people to consume more! Not less) and it decreases their margin
But people shouldn't say that the consumer will consume less because the prices are going down and that he will delay his purchases because it is not true at all, only people really out of touch of the real people can say that consumers delay their purchases and consume less if the prices go down and that prices going up make happy custumers!
Consumer credit is a problem, not a solution; people going into debt to buy tvs, appliances and such (even cars) is a bad thing for the economy but maybe shouldn't go there because we were starting to agree
Agree that in rare cases maybe people restrain from buying to have a lower price but it is the exception, not the rule
Oh, and one other thing about waiting for lower prices--even if this doesn't have a large impact on some sectors of the consumer economy, it has a HUGE effect on the stock, bond, and commodity markets. While I may not care about whether I can get a TV a little cheaper a couple months from now, you bet I'm going to care if I think I can buy stocks cheaper if I wait a little while.
Interesting point but we are not talking about consumer prices anymore but prices in general there; let me think about this one a bit
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