Technology is deflationary, but you don’t see the tech industry crashing as people wait for steep discounts far exceeding 1% over a couple years or so. Deflation is made out to be a boogeyman because it means the peasants get a pay increase if they keep the same wage unlike the pay cuts they currently receive through inflation.
The newer technology costs more than the old, but, barring ridiculous price pumps like the kind from nvidia, they’re priced around what the old technology was when it was new, thus it’s cheaper given the effect of inflation. Either way, it doesn’t negate the point that people don’t forego new technology purchases because they’ll be cheaper in a couple years or so. That goes against the argument that deflation-haters love to claim, that somehow people will wait because it’ll be cheaper. People don’t actually seem to operate like that in practice.
I know what the idea is, but is it actually true in practice? If the rate of deflation was, say, 2%, who would actually hoard cash just because it’d be supposedly worth 2% more? I highly doubt customers would, especially since it’s not like businesses would automatically cut prices by 2%. As for businesses, why would they hoard that cash when they can make investments that would increase the amount of cash they have? Surely, if a 2% increase in value was so worth hoarding cash, why aren’t they all just hoarding cash into interest-paying accounts that pay 4% in a 2% inflation environment? Constant inflation has been the prevailing theory, but it doesn’t mean it’s the optimal setup.
U.S. inflation falls to 3%, lowest level in more than 2 years, as price pressures ease (www.politico.com)