I was just reading this story on CNN and began thinking (always something to be worried about). In the old days, deflation was a worry because the reduction in prices meant cut backs in production which led to job losses and salary decreases which then reinforced the deflationary cycle. Those were the old days. Now we hardly produce anything here – in the US – anymore. The production is overseas. Yes we still have sales jobs here, but even those are being phased out thanks to the internet. Cutbacks will surely include a reduction in advertising (thank God!). What we tend to ‘produce’ now in the US are services and intellectual property (something large parts of the rest of the world do not even recognise). The MPAA and RIAA members really do not have much cost tied up in production so they can easily reduce prices along with the reduction in demand. Many service industries (like medical) are simply not discretionary spending – so they are safe.
What is really going on here and is it something to worry about? It will not be painless, but all I see is a reduction of this mindless consumerism that is destroying the planet. As technology progresses we will eventually have to face the prospect that most people will not have to have jobs – and I’m not talking about living on the dole either. There simply will be very little reason to ‘work’. It is going to happen and when it does we had better be socially ready for the consequences. Perhaps a bit of deflation will serve as a test of how we will deal with our inevitable future.