Is deflation truly that bad for an economy?

[V for Varoufakis]

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

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[Wekkel]

the laws of economics

Appeal to authority and no arguments?

[dinofelis]

According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

The amount of banknotes in circulation ALWAYS corresponds to what you buy with it
If there are less bank notes, then you can buy more with a single bank note.  If there are more bank notes, then you can buy less with a single bank note.  In the end, with all the bank notes, you can buy everything.  No matter how many bank notes there are.

If there's 1 kg of gold in circulation, then that 1 kg of gold will buy the whole world economy.  If there is 1 ton of gold in circulation, then that 1 ton will buy the whole world economy.  In the latter case, you will be able to buy exactly 1000 times less with 1 kg than in the former case.

[deisik]

According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

The amount of banknotes in circulation ALWAYS corresponds to what you buy with it
If there are less bank notes, then you can buy more with a single bank note.  If there are more bank notes, then you can buy less with a single bank note.  In the end, with all the bank notes, you can buy everything.  No matter how many bank notes there are.

If there's 1 kg of gold in circulation, then that 1 kg of gold will buy the whole world economy.  If there is 1 ton of gold in circulation, then that 1 ton will buy the whole world economy.  In the latter case, you will be able to buy exactly 1000 times less with 1 kg than in the former case.

Who's told you that? It seems that you are overestimating the value and buying potential of money. Different countries use different monies, and even with gold you won't be able to buy the whole world economy, since not all countries (let alone individual sellers) consider gold as money, and not all of the world economy is for sale in the first place...

Wealth is not money

[dinofelis]

Who's told you that? It seems that you are overestimating the value and buying potential of money. Different countries use different monies, and even with gold you won't be able to buy the whole world economy, since not all countries (let alone individual sellers) consider gold as money, and not all of the world economy is for sale in the first place...

Wealth is not money

... assuming for the example, gold being the only money of course.

The point was that it doesn't matter how much "money" there is, whatever it is.  Price will adapt.

And by "the economy" I meant of course total aggregate demand (or offer).

[deisik]

Who's told you that? It seems that you are overestimating the value and buying potential of money. Different countries use different monies, and even with gold you won't be able to buy the whole world economy, since not all countries (let alone individual sellers) consider gold as money, and not all of the world economy is for sale in the first place...

Wealth is not money

... assuming for the example, gold being the only money of course.

The point was that it doesn't matter how much "money" there is, whatever it is.  Price will adapt.

And by "the economy" I meant of course total aggregate demand (or offer).

Won't work. First, it is exactly supply, not demand, that matters here. Second, if sellers taken together (aggregate supply) want 10 kilos of gold for their goods but you have only 1 kilo, guess what will happen? You would evidently say that the prices will adapt (namely, the prices that sellers ask), but this is not what will actually occur. You will spend your only kilo of gold (since sellers won't sell below production costs en masse), and the remaining goods priced for other 9 kilos will not be sold...

[rax]

In a deflation,the people delay purchases.  This reduces demand for goods and services, which means employers have to reduce production, which means they reduce wages or hours and lay off workers

From first look, it seems reasonable, but if you look long term, it is totally different: In a deflative environment, people will delay the consumption and accumulate large amount of savings, with that amount of savings, their financial health is better and better, thus the whole society is stronger. But in an inflative environment, people will borrow more and more, and ends up with huge load of debt that they struggle to pay back, that will impoverish the whole society and make majority of people heavily enslaved by the banking class

Obviously, banks don't want you to save more and more, thus they have to pay you more and more interest, they want you to borrow more and more so that you can pay them interest, that is the true reason behind the inflative monetary policy

Boomshot! 

[johnyj]

You say that most of the people had been robbed off of their wealth long before the bubble burst, but this alone would immediately cause the instantaneous collapse of the bubble (right after people had lost their wealth), since the bubble can only exist as long as new money is flowing in it, and in ever increasing amounts at that.

The bubble only collapse when people find out that their wealth on paper start to drop, and they rush to sell it. As long as that paper wealth is rising or keep flat, people will just hold into it or buy more, thus the sell pressure on market is not enough to trigger a downfall, however those who drove the bubble has already cashed out long before the crash, because they know in advance, when they stop injecting more credit into the market, the bubble will burst inevitably

[johnyj]

Wealth is not money

This is the common statement trying to hide the truth. Money is wealth, and it is the most liquid form of wealth, because it can exchange any kind of wealth at any time, anywhere (Domestically)

Those who claim that money is not wealth are usually banks, since they don't want others to be suspicious about the fact that they create wealth by just writing numbers and printing. If money is not wealth, then their money creation seems not a big deal

[johnyj]

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

According to this law, the amount of USD in circulation has increased 5x since 2008, so we should have 5x more goods and services in the market, which is not true

Or, I can create trillions of USD as I want but put all of them in my own account, so that the amount of banknotes in circulation correspond to the quantity of goods and services in the market

I believe this law of economics: In a free market, anything with exchange value, including money, must have a production cost close to its face value, otherwise it is a scam

[V for Varoufakis]

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

According to this law, the amount of USD in circulation has increased 5x since 2008, so we should have 5x more goods and services in the market, which is not true

Or, I can create trillions of USD as I want but put all of them in my own account, so that the amount of banknotes in circulation correspond to the quantity of goods and services in the market

I believe this law of economics: In a free market, anything with exchange value, including money, must have a production cost close to its face value, otherwise it is a scam

You said exactly the opposite! You said: the quantity of goods and services must correspond to the amount of banknotes! lol lol !!

EDIT: You "said"

[alani123]

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

Germany, one of the biggest and supposedly stable economies in Europe has one of the biggest gold reserves in the world. This happens while they're part of a monetary union. They're not the only ones that control the rate of money printing within this union.

China has also increased the rates it imports gold. While I agree with you that it's unlikely for a gold standard to return, gold is still held as a reserve globally.

[johnyj]

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

According to this law, the amount of USD in circulation has increased 5x since 2008, so we should have 5x more goods and services in the market, which is not true

Or, I can create trillions of USD as I want but put all of them in my own account, so that the amount of banknotes in circulation correspond to the quantity of goods and services in the market

I believe this law of economics: In a free market, anything with exchange value, including money, must have a production cost close to its face value, otherwise it is a scam

You said exactly the opposite! You said: the quantity of goods and services must correspond to the amount of banknotes! lol lol !!

When did I say that? I think quantity of goods and services has nothing to do with banknotes

[V for Varoufakis]

The gold standard (fixed supply) and the inflationary banking fiat system, violate the quantity theory of money (M=PQ/V), the most important law in economics. Both are scams.

[dinofelis]

The gold standard (fixed supply) and the inflationary banking fiat system, violate the quantity theory of money (M=PQ/V), the most important law in economics. Both are scams.

That's a bit like "the moon and Mars violate Newton's law of gravity ; both are scams", no ?

The quantity theory of money cannot be violated because it is tautological: both sides express the price of what has been bought during a certain time with a certain monetary asset.  On one side it is the total price of sold stuff (P x Q), on the other side it is the total amount of money paid for it (M x V).  Both are tautologically equal: what you pay for it, is the price of it.  So the equation can only be valid.

If 1 million dollars is spend buying stuff, then the price of what has been bought is 1 million dollars, and the amount spent on it is 1 million dollars, right ?

[dinofelis]

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

Germany, one of the biggest and supposedly stable economies in Europe has one of the biggest gold reserves in the world. This happens while they're part of a monetary union. They're not the only ones that control the rate of money printing within this union.

China has also increased the rates it imports gold. While I agree with you that it's unlikely for a gold standard to return, gold is still held as a reserve globally.

I don't think that the amount of gold held by a central bank has anything to do with the currency they emit.  It is just that a central bank, which can emit a currency, can also use that currency to manipulate markets: it doesn't cost them anything because they can print the money to buy in the market.
Central banks usually want to manipulate the markets of other stores of value, such as gold, to make people loose money in it (except for their friends).  Bitcoin will, if it is big enough, also be manipulated by central banks.
The essential reason for central banks to manipulate other stores of value is to make them more volatile and hence less attractive as store of value, and keep people from using them in general instead of their printed money.
This is why they pump and dump regularly the gold and silver market for instance.

It has nothing to do with "keeping reserves" (for what ?), but is sold to the public that way.

Central banks want people to use their money, also as store of value.  They need to destroy confidence in all other forms of store of value.

[deisik]

Wealth is not money

This is the common statement trying to hide the truth. Money is wealth, and it is the most liquid form of wealth, because it can exchange any kind of wealth at any time, anywhere (Domestically)

Those who claim that money is not wealth are usually banks, since they don't want others to be suspicious about the fact that they create wealth by just writing numbers and printing. If money is not wealth, then their money creation seems not a big deal

Do you really believe that "it can exchange any kind of wealth at any time, anywhere"? It is certainly a far cry from reality. Say, you have a home (where you live and which you love for its uniqueness), and someone suggests you sell it, and gives a higher price than the average on the market for that type of house at that. Would you sell it? There are a lot of things that can be bought and sold, but which people may not want to sell for whatever reason and whatever money...

And I don't even say about things that are commonly considered as wealth of top quality, but simply not for sale (in fact, being more valuable than money itself)

[V for Varoufakis]

Yes dinofelis. They are both scams. Money supply should be controled by   M=PQ/V    or    M=kPY (Cambridge equation). https://en.wikipedia.org/wiki/Cambridge_equation.

[deisik]

You say that most of the people had been robbed off of their wealth long before the bubble burst, but this alone would immediately cause the instantaneous collapse of the bubble (right after people had lost their wealth), since the bubble can only exist as long as new money is flowing in it, and in ever increasing amounts at that.

The bubble only collapse when people find out that their wealth on paper start to drop, and they rush to sell it. As long as that paper wealth is rising or keep flat, people will just hold into it or buy more, thus the sell pressure on market is not enough to trigger a downfall, however those who drove the bubble has already cashed out long before the crash, because they know in advance, when they stop injecting more credit into the market, the bubble will burst inevitably

How can they buy more if by that time they had long been stripped of their wealth (as you said earlier)? Also, if they had been robbed off of their wealth, wouldn't it be natural that they would try to cash out immediately, thus causing the bubble to pop? Your arguments lack a proper timing between events (namely, complete stripping of wealth and bubble collapse), thereby rendering you whole point dubious (that withdrawing of all fiat from an economy won't stall or crash it)...

[manwithat]

The problem is that the nominal interest rate cannot fall below zero, because that would mean reducing savers’ bank balances every month, and would prompt them to withdraw their deposits from banks and stash cash under the bed. Together with inflation, this puts a floor on the real interest rate too. If inflation is low and real rates can’t fall far enough to boost demand and perk up prices, demand will weaken still further. This is the dreaded deflation trap.

http://www.investing.com/rates-bonds/switzerland-10-year-bond-yield

And switzerland has the official interest rate in -0.75%