So, how long before we reach a deflation spiral as more and more people hoard their money in hopes that they can buy more stuff for it tomorrow than they can buy today which will totally crash the economy? Just a bit more of this and bitcoin will start to look pretty good!
> Name a single deflationary spiral that has happened.
None whatsoever.
> Identify how much spending you can postpone until next year.
Everything except for life's necessities.
> Reflect if a deflationary spiral is even remotely likely.
It isn't but it's an interesting thought experiment.
A world with a large deflation is probably a world in which all natural resources have been harvested and the only things that still flow freely are sunlight and rain.
The extremely strict monetary policies of German president Hindenburg, a reaction to the hyperinflation of a few years before him, caused a deflationary recession that directly preceded the rise of Hitler.
Japan has had zero net deflation in the last 30 years. Their CPI is higher today than it was in 1990 for example.
Here's what Japan had:
1) Too much monetary expansion in the 1970s and 1980s, leading to bubbles in both real estate and the stock market.
2) When monetary expansion slowed down, they suffered the popping of both of those asset bubbles.
3) In response to that fake boom ending, they turned to accumulating debt.
4) That debt has led to protracted stagnation for ~20 years. Which has now led to currency debasement to devalue that debt, because it's consuming so much of their budget, and the the central government can no longer borrow from Japan's savers (because their savings rate is non-existent now).
You can say they have had net inflation if you pick your time range correctly, but the graph shows spurts of deflation followed by spurts of deparate inflation via QE that doesn't solve the deflation.
Google "Japan deflation" today and you'll get articles from yesterday describing how they are still trying to fight this problem.
Right, unless you're stashing currency into your mattress or burying gold bars in the yard, your money hasn't gone anywhere. It's in the bank, which is the lending it out to those who have a a better user for it.
Hoarding is a an invented scary word for saving. Saving is the underpinning of all investment, and investment is the key to productivity gains. Productivity gains are the key to increased living standards.
To then turn that upside down and say that saving makes things worse is only possible by using the word 'hoarding' as it conjures images of a fleeing deposed lord burying the family treasure in a field.
In reality, returning economies to health requires a stable or increasing rate of savings.
agree but would add even the mattress and metal hoarders serve a purpose in signalling that the offer of risk vs reward in current interest rates needs adjustment.
This is all distorted however since the central banks keep their hand on rates and decide what the market should accept for the risk lending savings to the bank (depositing).
The problem is that a Fetishistic obsession with 100% cash savings instead of actually investing in something is not a good thing for the economy.
It also leads to bizarre outcomes where foolish pensioners invest in exotic and risky cash like instrument's like PIBS instead of 100+ year old investment trusts.
Yes, but you're saving to accumulate an amount with some particular purpose, usually not because your money will theoretically buy you more tomorrow (likely it will buy you less in the normal inflationary version of the world).
Hoarding is something like but not quite exactly the same as saving.
