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Comment by shortandsweet | Hacker News Reader

Why do you feel we're living in deflationary times?

I also would like to hear rsync's answer. But I'll make a guess:

The (world) population is no longer growing (much). But productivity growth hasn't stopped. The result is that stuff gets cheaper, that is, the same number of dollars buys more. That's deflation.

Worse, we've gotten to the point where many people have what they need - not necessarily everything they want, but most of what they need. (I'm not going to buy twice as much food if my salary doubles. I'm not going to drive twice as many cars. I'm not going to buy a house that's twice as big. I'd use almost all the money to pay off debt and to invest.) That makes it hard to create inflation in the basic stuff, because you can't make demand exceed supply.

>The result is that stuff gets cheaper, that is, the same number of dollars buys more. That's deflation.

It's more about the number of dollars out there. Fractional reserve means that a dollar saved leads to dollars being created. Boomers saving up for retirement meant lots of dollars being created. Boomers withdrawing and buying stuff means lots of dollars will be destroyed. Fewer dollars means dollars become more valuable i.e. deflation.

Exactly. Just because tech is cheaper doesn’t mean food or my cost of living has decreased.

Because we are. Without taking action to curb it, the US will start to see deflation take hold. This is due to an overall aging demographic who are beginning to leave the workforce, an overall increase in savings/investment across the population, lowered rates of consumption, the younger demographic having less children, higher rates of education and on and on.

This has already begun to in both Germany and Japan. In the former, they've been able to curb things through government intervention. Japan on the other hand has really struggled.

On the contrary the price of up-keeping a household has increased dramatically.

30-40y ago it was not uncommon for a single pension to cover all expenses of:

- food

- car or two

- paying a mortage

- having 4 kids going to school

- other household expenses

- saving up money

Currently it is not possible. How in such a case do you still think we live in deflation times?

I would rather say that “some things” became cheaper due to technology advancements, but common things inflated so drastically, its literally impossible for young people to start families with sustainable life.

A fairly simplistic empirical examination of the monetary policy since 2009 proves this:

- Historically low mortgage rates

- Decreasing bond yields

- Increasing withdrawals from 401k and other retirement funds

- Increased savings rates for the younger demographic

- Reduction in consumer spending

- Over a decade of QE

Low rates and reduction in consumer spending are rather signs of recession not deflation..

From 2008 crisis pretty much every country in the world is printing money like crazy. Its easy to print more digital numbers, its harder to gain actual land to inhabit ppl.

Thats why properties and land gain so much value lately and thats why its the biggest issue of them all - huge inflation in the housing department.

Don’t mean to butt in, but personally, the fact that I’m typing this on a piece of $300 hardware (phone) that would have cost millions in the 80’s, hundreds of thousands in the 90’s, and definitely over a thousand in the 00’s is a good indicator.

I think computer hardware is one of the few things that decreased in price over time. The price of most other good and services has definitely increased since the '80s.

And despite the same technological improvements, gasoline is decisively more expensive. Technology is purely deflationary, so the situation with phone cost isn't very telling. What is more impactful is the cost of phone service vs median income across those decades, despite technology's deflationary forces.

Gasoline pump prices are highly impacted by taxes and regulations so those don't tell us much about core inflation or deflation. Look at the spot price of crude oil on international markets. The price today is still well below previous peaks.

Been to the grocery store, ordered takeout or tried to buy a house lately? The prices of electronics (calculators, watches) fell consistently throughout the 70s which was a period of very high inflation. You can't cherry pick one sector.

Of course.

It is very difficult to get a good number across all sectors. Despite my post, I’m not all that convinced we are in a deflationary period. The bell-weather asset for me would be Gold, and its price since I’ve been alive wouldn’t make me lean towards deflation.

If anything would, I suppose it would be the number of hours worked. That is, how much labor does it take to support a reasonable lifestyle. In my experience — and I’m an old geezer, so take this with a grain of salt — it seems like a lazy bastard can get by in this world a lot easier than 100 years ago. The degree of manual back-breaking labor that went into earning a dollar has decreased significantly. I don’t know how that would get figured in.

Gold prices aren't highly correlated with inflation so that would be a poor indicator. If you look at the actual historical data, gold isn't a very effective inflation hedge.

>> It is very difficult to get a good number across all sectors.

That's what cost of living indexes are for.

>> The bell-weather asset for me would be Gold

You probably mean to say gold futures or gold-based derivatives. There are more people who think they own "gold" than there is physical gold on this planet. Unless you have a bar in your hand, you own a contract tied to the price of gold, ie paper.

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