tag:blogger.com,1999:blog-5404820640426099135.post8423251107464788599..comments2023-10-31T00:46:35.316+13:00Comments on Anti-Dismal: Deflation: why the worry?Paul Walkerhttp://www.blogger.com/profile/13731003529546075700noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5404820640426099135.post-44427271737609051422009-04-02T20:10:00.000+13:002009-04-02T20:10:00.000+13:00Matt: downwards wage rigidity could be a problem w...Matt: downwards wage rigidity could be a problem with a high level of bad deflation but with good deflation or just a little bad deflation I don't see it as a big issue.Paul Walkerhttps://www.blogger.com/profile/13731003529546075700noreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-29969437792102796532009-03-31T09:26:00.000+13:002009-03-31T09:26:00.000+13:00There is a simple answer to your question about th...There is a simple answer to your question about the asymmetry of concern. Since tax rates are not adjusted for changes in the exchange value of money, inflation rewards the government with larger tax collections. Deflation does the reverse. Since people working for the government always want and think they deserve "more", "moderate" inflation hardly seems threatening to them, especially since their defined benefit retirement payments are indexed.LetUsHavePeacehttps://www.blogger.com/profile/15150236444828943359noreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-77104258574536711592009-03-30T16:35:00.000+13:002009-03-30T16:35:00.000+13:00Matt,Under good deflation periods wages would be g...Matt,<BR/><BR/>Under good deflation periods wages would be going up (the falling prices of commodities being a reflection in the increased productivity). Wage rigidity is only an issue in the most extreme cases.<BR/><BR/>SeanSeanhttps://www.blogger.com/profile/10510709497077490801noreply@blogger.comtag:blogger.com,1999:blog-5404820640426099135.post-45589424832562746962009-03-30T11:39:00.000+13:002009-03-30T11:39:00.000+13:00Paul, isn't downwards wage rigidity a major part o...Paul, isn't downwards wage rigidity a major part of the deflation problem? If firms find it hard to decrease nominal wages then faced with increasing real labour costs and declining revenues they will be forced to close up shop. Eventually things will (must) work out but nominal downwards wage rigidity takes time and considerable upset to work through.<BR/><BR/>I think this is why central bankers lose sleep over deflation.<BR/><BR/>Also, I'd have thought the good deflation is largely 'consumed' by quality improvements, and in any case largely hidden by official statistics because they are poor at handling quality changes. Although good deflation is presumably true, at least in any industry subject to Moore's Law, it is hard to see, and does not face downwards rigidities in the way labour does. Different animal, really.matt bnoreply@blogger.com