> I would believe these types of pop-economics articles a lot more if they could actually find and example of a deflationary spiral causing a long term depression.
The US depression of the mid-1800s and the UK depression starting in the late 1920s are usually cited as examples, and the Fed's deflationary policy after the 1929 crash in the US is often cited -- even by libertarian economists -- as a contributor to the US's Great Depression.
> Prices for many things already do decrease regularly. Every time I purchase a new computer I'm faced with the knowledge that, in 6 months time, a better, cheaper (or at least better value) model will come out. This myth that consumers will endlessly postpone purchases in the face of falling prices ignores the fact that a lot of ourchases cannot be postponed indefinitely.
Postponing consumption isn't really the issue, reducing investment is. If holding on to cash has positive expected utility, there is less incentive to to use funds that are beyond what is desired for immediate consumption and invest them in productive assets.
Also, see the comments by other posters on debt in deflation.
I agree on this: debt in deflation is rough. Maybe the lesson is that people/governments should stay out of debt, not that deflation is the boogeyman. That'd certainly be more anti-fragile.
The US depression of the mid-1800s and the UK depression starting in the late 1920s are usually cited as examples, and the Fed's deflationary policy after the 1929 crash in the US is often cited -- even by libertarian economists -- as a contributor to the US's Great Depression.
> Prices for many things already do decrease regularly. Every time I purchase a new computer I'm faced with the knowledge that, in 6 months time, a better, cheaper (or at least better value) model will come out. This myth that consumers will endlessly postpone purchases in the face of falling prices ignores the fact that a lot of ourchases cannot be postponed indefinitely.
Postponing consumption isn't really the issue, reducing investment is. If holding on to cash has positive expected utility, there is less incentive to to use funds that are beyond what is desired for immediate consumption and invest them in productive assets.
Also, see the comments by other posters on debt in deflation.