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Author Topic: Ideas on what a deflationary economy encourages  (Read 662 times)
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June 19, 2011, 04:58:09 PM

A steady deflationary economy encourages a few things. Please critique if this seems wrong.

  • Due to the presence of the currency as an ever appreciating asset, most financial assets lose their sheen for all except the investors with a LOT of wealth
  • As a corollary to the above, dividends become very important to firms. Most people would not tolerate firms not paying dividends for a long time
  • The idea of firms as ongoing concerns may reduce if genuinely good opportunities are lacking
  • Firms will keep minimum inventory. They will want to keep more inventory as raw material than as finished goods. JIT like processes will get a boost
  • Products might be designed for long term usage or high recyclability, since the purchase of most items will be compared with the currency which is constantly appreciating
  • Wealth concentration may increase. But the free ride that bankers have may not exist in a bitcoin world
  • More percentages of workers salary will be paid as proportion of company sales as defaltion makes it difficult for entrepreneurs to directly cut salaries
  • Consumption patterns will change slower compared to today. Fewer arbitrary fashion changes would occur

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