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Monday, April 14, 2014

Deflation: Is it a "Bad" Thing?

Many mainstream Economists state that deflation is a bad thing, and deflation should be avoided at all costs. This also includes economists from the Chicago School(Milton Friedman for example) and even Keynesian Economists(Paul Krugman) They believe that it should be avoided to the extent of printing more money and expanding the money supply. However, the writer of this article takes a different position.

Here is a quote from the article:

"But we know from experience that, even in the face of falling prices, individuals and businesses will still, at some point, purchase the good or service in question. Consumption cannot be forever forgone. We see this every day in the computer/electronics industry: the value of using an iPhone over the next six months is worth more than the savings in delaying its purchase."

If people choose to save versus consume, is that really a "bad" thing? As the quote states, consumption will occur, as savings is simply deferring consumption into the future.

Feel free to read the article here.

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