Apr 1, 2014

What Economists Assume About Deflation

It is just accepted as economic truth that if consumers felt that prices were going to fall and be 1 percent lower next year, they would not shop. They would not spend any money at all. They would wait a year to get that savings. They would wait a year to save 1 percent.

And they say that and is just accepted without anybody bothering to think how completely ridiculous or asinine such an assumption is. Can you even imagine a circumstance where you need something or wanted something and it costed 100 dollars but you were convinced that at the end of the year you could buy it for 99 dollars, that you would hold off on shopping, that you would not buy it, that you would wait a year and then buy it because it would be a dollar off? That you would go without it for an entire year in order to save that dollar. And then if at the end of the year you thought that it would be at 98 dollars if you waited another year that is what you would do even if you needed it. 

We know that this is ridiculous yet every economist is making that assertion with a straight face.

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.

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