What China's persistent deflation means for the world economy | Hacker News Reader

What China's persistent deflation means for the world economy

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8 pointsjarsin8 comments

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If you think something will be cheaper next year, you’ll defer purchase.

Entrepreneurs will defer investment.

Reduced investment, reduced productivity.

Reduced productivity, stagnant wage growth.

Reduced taxation.

Fewer public servants.

Public servants should avoid deflationary policies at all costs.

If prices decrease and salaries don't, doesn't that indicate economic prosperity?

In a perfect world you might think that but those 2 things rarely go together. Deflation is much worse than inflation as it stops everyone from spending leading to a death spiral that builds on itself.

Japan had little wage growth and deflation for 30 years. I'm sure the majority of Japanese would tell you it has not been good for them.

It depends. Technology products have been deflating for decades. It is actually what keeps the overall inflation in check.

The worlds largest exporter is in a deflationary death spiral. Unable to build entire ghost cities anymore they have no escape.

Deflation coming to the West in 1 year or so.

Why do you expect China’s deflation to be contagious and spread to the West? Or is there some underlying cause that both share, and it’s just that China is showing the symptoms first?

They are the worlds largest manufacturer and exporter. As their prices spiral lower and lower the goods they sell abroad do the same.

Trumps tariffs will just speed this up as demand in china drops even further and they dump goods on europe for firesale prices.

> the worlds largest manufacturer and exporter. As their prices spiral lower and lower the goods they sell abroad do the same

Eh, the deflation transmission channel for manufactured goods isn’t well established. If China had a floating currency and were a financial power, yes. But I’m sceptical cheaper consumer and intermediate goods will prompt deflation, particularly given the West is still battling inflation.

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