Jump to content
House Price Crash Forum
Sign in to follow this  
Ash4781

Demand Driven Solely By Discounts?

Recommended Posts

"The clothing, toys and household appliances sectors particularly benefited from this spending spree, notching up year-on-year growth against tough comparables from the year before," said David McCorquodale, at survey sponsor KPMG.But he added that retailers have been caught in a "difficult cycle", with demand driven almost solely by discounts."This promotion-led environment risks becoming the new normal -- retailers are struggling to persuade consumers to break the habit and go back to the traditional sales cycle."

From Reuters. An interesting comment. Has it really changed or all the same tricks exist ? CPI must be odds on to go Iinto negative territory and this also tallies with Cameron's rhetoric Re wage rises.

Share this post


Link to post
Share on other sites

If demand is driven solely by discounts, is that not a signal that prices need to be lower, rather than that consumers need to be persuaded to pay more? It's the kind of double-think that's rife in the housing market.

WE'RE SKINT YOU IDIOTS.

Share this post


Link to post
Share on other sites

Manufacturing has shot itself in the foot by being too efficient. There is too much "stuff" and now they're having trouble giving it away. The retail sector needs to be pared back by a long long way. Market forces?

Share this post


Link to post
Share on other sites

What a load of garbage. Does nobody actually operate in business?

There is no "manufacturing", there are "manufacturers" who are more than happy to grow their market share and profitability by outcompeting others.

This is brilliant stuff; competition and efficiency are driving better value to consumers. If they don't do it everyone is up in arms about price shafting, when they do it, it's a failure of capitalism.

As this process goes on some players will go by the wayside, the best will survive, niches will open up for new players who can grow, competition renews itself and the consumer wins.

Same with retailers; models are declining, new models are supplanting them, businesses will go broke and others thrive, all driven by consumer choice. It's superb!!

Edited by bogbrush

Share this post


Link to post
Share on other sites

What a load of garbage. Does nobody actually operate in business?

There is no "manufacturing", there are "manufacturers" who are more than happy to grow their market share and profitability by outcompeting others.

This is brilliant stuff; competition and efficiency are driving better value to consumers. If they don't do it everyone is up in arms about price shafting, when they do it, it's a failure of capitalism.

As this process goes on some players will go by the wayside, the best will survive, niches will open up for new players who can grow, competition renews itself and the consumer wins.

Same with retailers; models are declining, new models are supplanting them, businesses will go broke and others thrive, all driven by consumer choice. It's superb!!

If capitalism is inherently deflationary and the banking system cannot function properly in a deflationary environment (see panicking Central Bankers for details) then we seem to have a problem- the more efficient our productivity gets the closer comes the prospect of financial meltdown as debt becomes increasingly hard to service amid shrinking prices and the erosion of wages due to competition from technology.

On the face of it our financial system seems to have a DNA based on scarcity while our technology is starting to provide a degree of abundance- so we have 19th century financial structures attempting to function in the context of 21st century productivity.

Is it possible that the current financial system is simply a dangerous anachronism that is no longer facilitating wealth creation but becoming an expensive liability? With the exception of the bankers themselves and their clients among the 1% are the banks making the rest of richer, or poorer?

Edited by wonderpup

Share this post


Link to post
Share on other sites

If capitalism is inherently deflationary and the banking system cannot function properly in a deflationary environment (see panicking Central Bankers for details) then we seem to have a problem- the more efficient our productivity gets the closer comes the prospect of financial meltdown as debt becomes increasingly hard to service amid shrinking prices and the erosion of wages due to competition from technology.

On the face of it our financial system seems to have a DNA based on scarcity while our technology is starting to provide a degree of abundance- so we have 19th century financial structures attempting to function in the context of 21st century productivity.

Is it possible that the current financial system is simply a dangerous anachronism that is no longer facilitating wealth creation but becoming an expensive liability? With the exception of the bankers themselves and their clients among the 1% are the banks making the rest of richer, or poorer?

If anything it's the C19th financial structures that were disinflationary not today's. A step-change occurred around the end of the 1960s (in the US, somewhat later elsewhere) when credit markets began to be deregulated. Modestly at first and then recklessly.

cpi-1800-2005.png

Share this post


Link to post
Share on other sites

If capitalism is inherently deflationary and the banking system cannot function properly in a deflationary environment (see panicking Central Bankers for details) then we seem to have a problem- the more efficient our productivity gets the closer comes the prospect of financial meltdown as debt becomes increasingly hard to service amid shrinking prices and the erosion of wages due to competition from technology.

On the face of it our financial system seems to have a DNA based on scarcity while our technology is starting to provide a degree of abundance- so we have 19th century financial structures attempting to function in the context of 21st century productivity.

Is it possible that the current financial system is simply a dangerous anachronism that is no longer facilitating wealth creation but becoming an expensive liability? With the exception of the bankers themselves and their clients among the 1% are the banks making the rest of richer, or poorer?

It is not that banking cannot function in a deflationary enviroment - otherwise there would never be any funded tech companies.

No, what it is the banks can't extract obscene levels of commision and kickbacks from the system, or when they insist on doing so regardless, with the backing of the central bank and the goverement the real economy suffers, which is where we have been the last decade or so.

Share this post


Link to post
Share on other sites

What a load of garbage. Does nobody actually operate in business?

There is no "manufacturing", there are "manufacturers" who are more than happy to grow their market share and profitability by outcompeting others.

This is brilliant stuff; competition and efficiency are driving better value to consumers. If they don't do it everyone is up in arms about price shafting, when they do it, it's a failure of capitalism.

As this process goes on some players will go by the wayside, the best will survive, niches will open up for new players who can grow, competition renews itself and the consumer wins.

Same with retailers; models are declining, new models are supplanting them, businesses will go broke and others thrive, all driven by consumer choice. It's superb!!

I agree with everything you say bogbrush. That's the whole reason for doing it in the first place.

There is a problem with holding stock... If you over order then you are left with items that cost you more than you can sell them for. In the bad old days of '2%' inflation all you had to do was wait and you could at least get your money back.

Will this stop firms from putting in big orders, not that it matters, but isn't it like grit in the gears?

We had it with the new 12V led work lights, they were £49, then £39, then £29 and now £19.... How can you run a business like that?

Edited by XswampyX

Share this post


Link to post
Share on other sites

Demand driven solely by discounts?

Yes indeed, I saw the same thing happening in Japan in my time there. (1989 to 2004)

Basically I wouldn't buy anything at half price but just wait till I could buy at 1/4 of the price. Most things I bought are still doing a turn 10 years later!

Why did I leave? Business just became more and more difficult.

Umm..protect your selves.

Share this post


Link to post
Share on other sites

It is not that banking cannot function in a deflationary enviroment - otherwise there would never be any funded tech companies.

No, what it is the banks can't extract obscene levels of commision and kickbacks from the system, or when they insist on doing so regardless, with the backing of the central bank and the goverement the real economy suffers, which is where we have been the last decade or so.

So why is it that the Central Banks are so determined to prevent deflation? We can safely ignore the fable that deflating prices kills the sales of consumer goods- if that were true the entire PC market would have folded long ago.

The reason that deflation is so lethal to the finance sector is because they are in the debt business- and in a deflationary environment debt servicing becomes more difficult for obvious reasons- say you are a company that takes out a loan to invest in a new product- you will be paying back that loan from the profits on the sales of that product- but in a deflationary scenario those profits are declining relative to that debt if you are forced to compete by dropping your prices- so over time your debt grows larger relative to your income.

But this does seem to lead to an odd conundrum;

Capitalism is not a 'nice' system- it's a dynamic that hurts a lot of people- they lose their jobs, maybe their homes- or they are forced to work in crappy jobs for poverty wages due to 'market forces' or they hit the age of 50 and find that they no longer have any 'market value' and are tossed on the scrapheap ect- there are lots of downsides to this system.

So why do we all mostly agree that it's still the best system (at least compared to all the others!) The reason we accept this is because for all it's flaws and inequities Capitalism has one great virtue- it creates wealth more efficiently and consistently than any other system we have tried.

And this wealth creation is achieved via the process of 'creative destruction'- in which competition between suppliers exerts a constant pressure to both increase quality while offering the lowest possible prices.

So the thing we value most about Capitalism is it's inherently 'deflationary' dynamic- it tends over time to make goods and services both more plentiful and cheaper, leading to a better standard of living for most people ( most of the time)

But when we look at the financial system that funds this deflationary machine we observe that it really does not operate well in a deflationary world- it's product being debt that needs to be repaid-at interest- the last thing it needs is a world of declining profits and shrinking margins- how will it's borrowers pay off their bank loans if their incomes keep shrinking relative to their debts?

So we have an inherently deflationary process being funded by a system that cannot work well in a deflationary context.

This leads inevitably to the paradox that the more successful the real economy is at creating abundance the closer it brings the day that the financial sector collapses under the weight of unsustainable debt.

This may explain the absence of money in the star trek universe- once that bloody replicator was invented it was game over for the bankers. Hyper productivity = financial collapse.

Edited by wonderpup

Share this post


Link to post
Share on other sites

How would the Simon–Ehrlich wager stand in 2015? Simon comfortably won and got paid out, but running it for longer and had turned a few times, and by 2011 people claiming Ehlich wins out (credit fuelled price speculation imo), when in 2015... general commodity prices down at 12 year lows.

Capitalism... love it. Just save some money to take advantage when speculative bubbles pop and reflations and victimhoods and anti-capitalism measures fall away.

More people, and increased income, cause resources to become more scarce in the short run. Heightened scarcity causes prices to rise. The higher prices present opportunity, and prompt inventors and entrepreneurs to search for solutions. Many fail in the search, at cost to themselves. But in a free society, solutions are eventually found. And in the long run the new developments leave us better off than if the problems had not arisen. That is, prices eventually become lower than before the increased scarcity occurred.
—Julian Simon

Although I agree with concern about making profits in saturated markets with over-capacity. If you have to be in that sector.. be the best, market yourself above the rest, give great customer service... all about "how we do it" and charge big premium?

We can't all be winners; although the forever HPIers want to be, and claim victimhood any sign prices fall. It's competition; money profits to the best. Be the best. Save in boom times so you have something and can avoid wonderpup's "thrown on scrapheap in 50s" - or where you're still in demand from... being the best/knowledgeable. Too many want a world where it's equalised, whilst also wanting locked in HPI to protect both property rich and overindebted victims.

There are many experts, of course, who will say that the key to prosperity is to revive manufacturing. Their prescription to do this is to focus incentives in ways that encourage long-term, fixed investment. It sounds plausible when viewed from a conventional perspective. But it is backward-looking and probably won't work.
The reason fixed investment is lagging is that its productivity has fallen. Most of all the industries that figured in the post-World War II boom now face saturated markets with worldwide overcapacity. Force-feeding additional capital into fixed investment in the manufacturing side will only aggravate the long-term problem by increasing the overcapacity. It also takes resources away from the small business sector which creates new jobs.
Saturated or slowly growing replacement markets with overcapacity require companies to compete by increasing productivity. This is a good thing in itself. But higher productivity with flat markets means fewer jobs. Short of buying the products directly and giving them away, which is obviously ruinous, there is little that can be done to rescue old-line manufacturing in aggregate.
The hope for the future lies in incubating new products and services, in other words, in entrepreneurship. To do that, flexibility and adaptability must be the hallmarks of the economy and government policy. Legions of small businesses should be encouraged to form. Many ideas need to be tested in the market place in order to come up with the 20 to 30 major innovations that will create vigorous economic growth. Unfortunately, that is not likely to be the path that policy takes.

Share this post


Link to post
Share on other sites

This may explain the absence of money in the star trek universe- once that bloody replicator was invented it was game over for the bankers. Hyper productivity = financial collapse.

It would be a great financial collapse though.

We've advanced a lot. Unfortunately some of the brightest young minds who could possibly help lead us to a bigger push towards it, weighed down by house-price-hyperinflation, expensive rents... might as well do something less demanding than Computer Science with AI, when house prices going up 10% a year and everyone celebrating it. Where there's no incentive for hard demanding work, or confined to grotty expensive room in Cambridge and others telling how proud they are at their recent £HalfMillion terrace purchase.

Too much on housing market, BTL people-farming, and the push for taking on ever greater debt, and the celebration of house price growth just about everywhere including daily MSM.

So molecular sized nanobot assembler machines that can arrange matter at atomic level... will have to wait, until this malivestment vulgar world, gives back some fairness, imo.

One Culture adage is, Money is a sign of poverty, meaning that money only has a function in a scarcity economy, and therefore its existence betrays a pre-abundant (poor) society.

That guy with Picard had some very good appearances in The Fugitive in the 60s.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   206 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.