Let me guess, deflation disincentivizes consumption so it can lead to a feedback effect that leads to recession?

Pay and wages tied to the rate of inflation would probably preferable; I’m sure congress will get right on it…

Lower prices incentivize consumption though, right? It definitely hurts profits, but people buy lots more pointless shit if they can afford it.

Static lower prices might, but deflation does not. If prices will be lower tomorrow or next week, it's wiser to hold on to your money and buy later.

Sounds good in theory, but I don’t think that holds up in practice. For example, computers getting more affordable and powerful year by year didn’t stop people from buying them.

If the price is lower than the opportunity cost of NOT having it, people will buy it now, even if the product will be priced better next year.

And a large part of the price increases people are struggling with are food and housing. It's not like you can wait till next year to eat or have a place to live.

Sounds good in theory, but I don’t think that holds up in practice. For example, computers getting more affordable and powerful year by year didn’t stop people from buying them.

It absolutely delay people buying. If you held out for 6 more months, you'd get a substantially faster computer. Thats the second variable you're introducing with this example. If your current computer was "fast enough" you'd wait, and people did.

It’s not like you can wait till next year to eat or have a place to live.

Eat? No waiting. Live? Sure! If prices were consistently falling because of deflation, and you knew renting for a year would allow you to buy a larger house with the exact same amount of money you hand in your hand, most would do that and rent for a bit.

This is my problem with economics. You're talking about theory and practice as if they're the same thing. All consumers do not make perfectly rational choices. Hell, most don't. This kind of theory only explains how rich people want you to think things work. It's not how things work in the real world.

This is my problem with economics. You’re talking about theory and practice as if they’re the same thing.

Way back when, I used to sell computers and computer parts at retail. I assure you this was a regular conversation topic. "When is the Voodoo 4 graphics card coming out? 4 months? Okay I won't buy the older Voodoo 3 now because I can make do with my Nvidia TNT2 until then."

All consumers do not make perfectly rational choices.

No they don't, nor or do they need to if you're taking a macro view.

Hell, most don’t.

Are you saying:

• consumers NEVER make rational choices?
• consumers don't make 100% rational choices 100% of the time a choice is available?

I disagree with the former, but I agree with you on the latter. None of that invalidates micro or macro economic theory.

This kind of theory only explains how rich people want you to think things work. It’s not how things work in the real world.

Many rich people get rich because this works. They also play dirty tricks to create the situations, but then again in those situations the theory works.

I'll be the first to say economic theory is far from perfect and the deeper you go, the more complex, and potentially less reliable, it gets, but the basics are pretty sound.

For buying a house, isn’t it kinda like the stock market (except way less liquid). Yeah, the prices may go down in a year but someone may swoop in and buy while you’re sitting on the sidelines trying to time the bottom.

A specific house may be bought up, but others will be available that are similar for substantially less in a deflationary market.