I will scream if I see again the comment that Japanese deflation tends to make consumers defer purchases. This is ridiculous. If an economy has 2% deflation a year then a good that costs 100 will cost 98 after a year. Who'd defer the purchase for this saving? The convenience of the good is surely worth at least this much! And how many people put off buying computers because they'd be at least 20% more cost-effective if they waited a year? After an initial lag the steady state emerges.
People who make this statement on deferring consumption have mislearned the lesson from bouts of 10%-20% deflation. When deflation is at these levels then people may defer purchases, but on the other hand the deflation is most probably caused by people deferring purchases.
Tuesday, December 15, 2009
Subscribe to:
Comments (Atom)