Thursday, April 10, 2014

Economists Do Not Live In Reality

From Bloomberg on Central Banks yesterday, “The greater danger comes when disinflation turns into deflation, which leads households to delay purchases in anticipation of even lower prices…” It is incomprehensible to me that anyone with an IQ higher than room temperature keeps repeating this nonsense.

If it were true then the consumer electronics industry would have failed miserably. At no time did a personal computer even cost more than 15% less than the one you bought yesterday. Every person who ever bought a laptop for $1800 saw it advertised the next week for $1500 or less.

Flat screen televisions have been plummeting in price steadily, rapidly and continuously for ten years, and have been selling like pancakes on Shrove Tuesday. The only problem retailers have had is keeping them in stock.

If your refrigerator craps out, do you delay replacing it "in anticipation of even lower prices," and for how long do you wait?

Interesting that this one did not come from Paul Krugman’s ivory tower.

1 comment:

bruce said...

if your fridge craps out, you move to Alaska where you don't need one... Oh wait, global warming prevents that. Bummer

Actually in laptops, prices usually stablilize, but the power and features increase, so you get more bang for your buck. And the higher end TV's tend to reduce in cost, but there is a point where they won't go lower, since the manufacturer /retailer has a price point they can't or won't go under. And yes, I know about loss leaders and amortization and stock reduction and all that.

But your post title is so often the case, that economists don't live in reality. And neither do politicians in most cases.

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