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Why excessively low inflation can damage economies

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All nonsense.

Inflation is good for debtors, horrible for savers.

Who is a traditional saver? The average Sato on the street.

Who is the biggest debtor, perhaps the biggest the world has ever known? The Japanese Government.

Who does the mainstream media support, the government or the average nearly broke dude on the street?

Voila.

The idiotic and blatantly false articles like this.

I can see it now. World class economists are surveying the supermarkets in small towns and countrysides. They see people barely scraping by choosing what to buy, and what not to buy.

Naturally, they come to the conclusion that if only prices kept going up, everything would be peachy.

Right.

4 ( +5 / -1 )

but the problem is inflation may be easy as raising some tax or charging more, but salary increase is like asking for something impossible.

3 ( +3 / -0 )

Another viewpoint: government spending it too high. While wages stay low, taxes and other expenses continue to rise incrementally. The consumers, a growing proportion of whom are slipping into the poverty level, cannot afford basic needs, to save money, or educate their children, are becoming, practically speaking, slaves to the people who own and set prices. Reduce government spending. Balance the budget. Reduce the size of government. Reduce taxes. Then people can afford to pay more.

3 ( +3 / -0 )

When prices barely move, many people and businesses postpone purchases. Why rush if the same price - or lower - will be available in six months?

But economists also often argue that the availability of credit helps the economy. However, people who buy things on credit pay the current purchase price, plus interest, i.e. they are willing to pay a higher price to have something now, rather than saving up for six months and buying it for cash. Such people do not care about the price in six months time.

Low inflation is only bad for governments that cannot balance their budgets as they cannot inflate away their debts. The useless Kuroda seems to take pride in making the Yen lose its value, but any idiot could do that. The real skill is in maintaining the value of a currency over time so that people can have confidence in that currency.

3 ( +3 / -0 )

Excessively low inflation can't damage anything. Is the author of the article that stupid? Or does the author think that his writers are stupid?

Inflation and deflation are not causes, they are effects. High consumer demand causes inflation, low consumer demand causes deflation. It is as simple as that, got it? You cannot cause demand by increasing inflation, and you cannot cause low consumer demand by creating deflation, understand? Ice does not cause cold weather, cold weather causes ice.

Yet, it seems that the author and the government really believe the people are stupid.

The government and big businesses need inflation. Without it, their ability to borrow at their current rates is simply not possible. Fully more than one fourth of all revenue collected is now spent on debt-servicing costs. A single percent of inflation reduces the national debt by a like amount each and every year, a single point of deflation does the opposite.

But the government and it's highly educated and paid economists cannot figure, or don't want to face the real problem, and that is the decrease in population. As long as the population continues to decrease at a rate of more than 6 figures per year, economic growth, and hence, inflation, cannot occur.

Rather than decrease spending to match the decrease in the population, they are doing the opposite, which is absurd. When your income decreases by 2% per month, you do not increase your spending 2% per month, do you?

The one and only problem that Abe and his group of dancing clowns have to solve is the declining population. Was it Adam Smith who said that "the best way to measure the prosperity of a country is by the rate it's population increases"? By this measure, Japan is the least prosperous of all industrialised countries.

The cause of the decrease in population is absurdly obvious, the cost of living is too high. People cannot afford to have children. And even those who do not have children find living in Japan expensive. Since goods are too expensive, they buy less, which decreases demand. When demand decreases, prices decrease as businesses try to get people to buy. This is deflation.

When the government spends more, and then taxes more to pay for their spending, the cost of living is further pushed up. Spending decreases even more, and deflation becomes even stronger. So the government tries to devalue the currency to artificially cause inflation. There is only one remote situation which such policy works, and that is one in which there is a growing population, and related economic growth. These do not exist in Japan right now, so devaluing the currency hurts more than it helps.

You said it, Scrote. Low inflation is only a problem for governments that want to print more money rather than raising taxes or employers worried about losing their slave labor.

Taxes are part of the problem. How much of the average person's money is absorbed in tax? And how much does this add to the cost of living? Figure more than half of your income goes for tax. Some of it, like the consumption tax, income tax, and residency tax are obvious. Some are not obvious, but you pay them just the same. The tax which employers, companies, and other higher-income entities pay is passed onto the employee and consumer. If a company is paying 40% tax, according to studies, about 70% of that cost is recouped from cutting salary or benefits, the remaining 30% is passed on to consumers. When you cry "tax the rich", remember that it is you who will end up paying for that tax. But governments operate on the assumption that people are ignorant or stupid. Unfortunately, they are right. Otherwise, things would not be as bad as they are.

3 ( +4 / -1 )

What a load of nonsense.

All the arguments in the article are simply wrong.

The economy of a declining society will shrink overall anyway so declining consumer spending is inevitable anyway. So what if debt burdens are magnified? Making debts in the first place isn't exactly smart, especially if you can't handle them later. Not to mention that the economy thrives on the work done by the people not by people making debts. The only economy that thrives on debts are banks and last time I checked banks don't produce anything anybody really needs to live. Wages don't necessarily rise with inflation. In reality most employers will wait until they have no other options left before raising wages by a minimal amount. Also the last argument just states deflation is bad because deflation is bad.

Japan and most importantly the Japanese people have been doing pretty well handling their crisis for the last 30something years unlike Europe or America which are in way worse condition after just a few years of crisis. Even Krugman recently admits to Japan handling the crisis way better than the other countries, not counting the whole Abenomics hoax.

Only about 0.1% of the population really need to worry about deflation, while 99.9% have to worry about inflation. And those 0.1% will do their utmost to make the other 99.9% believe that inflation and constant growth is necessary to 'save' the country.

3 ( +4 / -1 )

Why rush if the same price — or lower — will be available in six months?

Why rush if in six months time lower prices and a better product will be available in six months time? Think of TVs, computers, cameras. This is a result of advances in technology. We call it techonological advance, not deflation.

Is this technological advance bad for the economy? The answer may be yes in the case of the Japanese economy because so much of the technological advance now comes from Korea and China. Cameras seem to be an exception, but for how much longer?

2 ( +3 / -1 )

You said it, Scrote. Low inflation is only a problem for governments that want to print more money rather than raising taxes or employers worried about losing their slave labor.

2 ( +2 / -0 )

Very good comments above... One of the problems is that a lot of the over 60 crowd @want their cake and eat it too. If Japan can't allow more immigrants, fine, but they need to raise the age of drawing a pension t 69. Also the generous pension benefits to long-term full-time housewives hasn't helped Japan's debt situation. Thumb me down if you want, but these are the facts.

0 ( +1 / -1 )

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