Profits are the difference between the price it costs to produce a good and the price that good is sold for. As economics professor Jörg Guido Hülsmann makes clear in his book 'Deflation and Liberty', “In a deflation, both sets of prices drop, and as a consequence for-profit production can go on.” Adding, “Deflation is one of the great scarecrows of present-day economic policy and monetary policy in particular,” Hülsmann says. "It seems a nation will destroy its finances battling a non-threat." Why? Same thing Friedman asked, eh.
Answering Friedman's and Hülsmann's query will be my quest in the coming days.
The article 'Who’s Afraid of a Little Deflation?', by adjunct scholar John N. Cochrane at the Cato Institute, explains why a sudden drop wouldn't be good, but a steady annual decline of, say, 2%? Worries about that are overblown." This timely and well written article explains, point by point, why each of the most common mis-understandings being trumpted about the phantom are bullshit. How in almost all cases exactly the opposite is true.
Deflation means dropping prices and a slowing of the velocity of consumption. With European inflation declining to 0.3%, and U.S. inflation slowing, the phantom that now haunts the Western world's capitalists, bankers, investors, economists, elites and political puppets of all stripes - deflation - is finally being seen as the mirage it is. This phantom, this mirage, this cancerous growth paradigm, is a tool of elitist oppression.
Deflation means below zero interest rates. How can that be something the rich think tantalizing. Deflation means debts are often walked away from. Slow deflation means turning down the heat under the whole of consumer driven extractive capitalism 'sorta' voluntarily.
As the rogue primate apparently can't reel in it's collective wants to anywhere near a sustainable level. And as it's political suicide for any elected govt. to even suggest regulated degrowth. And as totalitarian type rules only highlight that we are more like a herd of cats than we like to admit.
So its apparent that mild, slow deflation of the huge debt bubble our dear leaders have created is not something to fear, it's our best and only hope. There are do-able solutions to our myriad of problems, in part because they are all connected at their base to...what must really change first...to what must never be spoken of...to Pogo's realization that "we are the enemy".