Re:Why Falling Prices Are Actually a Really Bad Thing
by dragonwriter on Thursday January 22, 2015 @11:11AM
(#8929877)
> Obviously, less lending is bad for the banks, but I fail to see how it would be bad for the consumer
Its not generally bad for consumers qua consumers (though there are ways that it can be, because it prevents large purchases that save in the long term), but its bad for the same people that are consumers as laborers because less borrowing by business and less investment in business (both effects of deflation) mean less paid work available, and less utility produced regardless of the distribution.
> So, can you explain, in a way that doesn't involve trickle-down economics, how borrowing money is a net gain for consumers?
It enables you to do things like buy a car to go to work at a job that pays well before you have amassed sufficient retained income from that job to pay for the car. Without the ability to borrow money, you may not be able to take (or, if you take it, keep) the job because you can't get to it.
Its not generally bad for consumers qua consumers (though there are ways that it can be, because it prevents large purchases that save in the long term), but its bad for the same people that are consumers as laborers because less borrowing by business and less investment in business (both effects of deflation) mean less paid work available, and less utility produced regardless of the distribution.
> So, can you explain, in a way that doesn't involve trickle-down economics, how borrowing money is a net gain for consumers?
It enables you to do things like buy a car to go to work at a job that pays well before you have amassed sufficient retained income from that job to pay for the car. Without the ability to borrow money, you may not be able to take (or, if you take it, keep) the job because you can't get to it.