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Those Of You Still Waiting To Purchase Their First Mobile Phone Will Love This

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I know you are out there-in your millions- still waiting for those mobile phone prices to drop that little bit more before you 'jump in' and bag that bargain you have waited a decade or more to obtain.

Sure, it's been tough all these years being without a mobile phone but we will have last laugh on those fools who were dumb enough to let their emotions cloud their judgement.

Ok- it's true- standing in a urine puddled phone box lacks the glamour of pulling out one of those nice shiny handsets but it's worth it-right? Because we are the cutting edge of consumer power- it's our resolve that will drive those prices down until one day-one glorious day- we will strike, panther like, and emerge finally into the sunny uplands of phone ownership, secure in the knowledge that we were not idiots who mindlessly handed over their money just because they wanted something today, when a few decades of restraint would deliver a far greater prize at a far lower price.

But today is not that day- not yet- that price to feature ratio is dropping all the time. But while you wait I thought you might like this Bloomberg article that explains just why so few people have ever purchased a mobile phone and why the mobile phone industry is so small and insignificant today.

Deflation Defeats Impotent Central Banks

Central banks are deadly fearful of deflation. That’s why the Federal Reserve, the European Central Bank, the Bank of Canada, the Bank of Japan and Sweden's Riksbank, among others, have 2 percent inflation targets. They don’t love rising prices, but they worry about the consequences of a general decline in consumer prices, so they want a firebreak. Unfortunately, they seem powerless to meet their targets in the current economic environment.

The guardians of monetary policy are riveted by Japan, where consumer prices have declined in 48 of the last 83 quarters. This pattern of deflation long ago convinced Japanese buyers to hold off purchases in anticipation of lower prices. But the result is excess inventories and too much productive capacity, which force prices even lower. That confirms expectations, resulting in yet more buyer restraint. The result of this deflationary spiral has been a miserable economy with an average growth in real gross domestic product of just 0.8 percent at annual rates since the beginning of 1994

http://www.bloombergview.com/articles/2016-03-01/deflation-is-defeating-impotent-central-banks

I think they might be on to us- they know we have been waiting in our legions in the shadows these past decades- but no matter- time is on our side after all.

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The concept of consumers holding off on purchases on deflationary expectations is complete nonsense. Infrequent, high value transactions where you typically put yourself in debt to buy like property or cars - sure ... But no-one is going to hold off on everyday/week/month purchases because they think it might be marginally cheaper next month.

The real reason they don't like deflation is because it kills the money creation through bank lending model stone dead. In order to sustain it, you need constant inflation of the money supply. It's why they are now mulling negative rates as it's the only way that private banks can continue to lend money (credit) into existence without going bust. And I doubt that will work for more than the short term, even if they can get it off the ground (physical cash would essentially need to be eliminated first and that will cause an outcry if not done slowly, taking many more years).

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Guest eight

I mentioned in an off topic thread that nobody read that I bought some one litre bottles of Head and Shoulders from Farmfoods for £5 each.

They're £4.99 now. Boy do I feel like an idiot.

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The concept of consumers holding off on purchases on deflationary expectations is complete nonsense. Infrequent, high value transactions where you typically put yourself in debt to buy like property or cars - sure ... But no-one is going to hold off on everyday/week/month purchases because they think it might be marginally cheaper next month.

The real reason they don't like deflation is because it kills the money creation through bank lending model stone dead. In order to sustain it, you need constant inflation of the money supply. It's why they are now mulling negative rates as it's the only way that private banks can continue to lend money (credit) into existence without going bust. And I doubt that will work for more than the short term, even if they can get it off the ground (physical cash would essentially need to be eliminated first and that will cause an outcry if not done slowly, taking many more years).

Deflation is a natural part of the business cycle. Since money is being created and destroyed simultaneously, the money supply is never conserved. What central bankers really fear is a Fisher-style debt deleveraging in which prices fall below the costs of financing production and/or servicing existing debt.

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I mentioned in an off topic thread that nobody read that I bought some one litre bottles of Head and Shoulders from Farmfoods for £5 each.

They're £4.99 now. Boy do I feel like an idiot.

I only just realized that those guys in the tatty clothes and long dirty hair are not homeless people- they are in fact savvy fashion buyers waiting for the price of new clothes and shampoo to drop.

The hilarious thing about these articles on delayed consumption is the fact that they were almost certainly written on some state of the art piece of kit that starting depreciating in value the moment it was first switched on- why aren't these guys still using that old linotype machine while waiting for the cost of silicon to fall through the floor?

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It would be nice if central bankers would stop trying to control micro consumer behaviour that is obviously outside of their control and instead focus on things they might actually be able to influence like, oh I don't know, asset price bubbles.

On second thoughts that might be controversial. Let's hire some econometrics PhDs to work out whether Japanese consumers delay buying food or a train ticket to work if they think it might be 1% cheaper nominally to do those things in a year's time.

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I agree, absolute nonsense. However it appears in economic textbooks as one of the theories about why deflation is associated with a slowing economy. It is palpable nonsense, but it is an easy concept to understand and it sticks in people's minds.

The reality is that deflation is a symptom of a declining economy not a cause of it.

Reduced demand causes prices to fall (see basic demand and supply curve). Lower prices means lower profits and wages and so in turn lower demand.

This is what Japan has suffered from. Just as an example, I stayed in a room in a family run Japanese Inn back in the late 1990s. Nice room with aircon etc. I returned in 2010. Price was cheaper, but it was tattier and the air conditioner had been taken out of the room (in July!). A good example of a deflationary spiral.

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I don't have a phone, I had one 10 years ago but it packed up after about a month.

Like some other things if you leave it long enough you lose interest.

Ironically, you are off topic.

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Using prices as a measure of aggregate demand (which is essentially what "inflation" is trying to do) is fundamentally flawed in this day and age, they should be able calculate aggregate demand directly using money supply and velocity, which would take natural price attrition due to efficiency gains and commodity prices out of the equation.

Edited by goldbug9999

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People holding off buying until prices become cheaper? What a stupid suggestion, next thing there will be a forum for those holding off buying houses until they become cheaper, err hang on a minute.

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Prolonged deflation destroys capital & employment.

Why would I invest in plant/tech if the products/services were destined to fall in price year on year, Id have to pay my employees lower & lower wages and they would be forced to spend less & less?

Re mobile phones - I bought my elderly father a replacement samsung last year. Brand new, boxed from EE shop - £2.99 how much profit did it earn Samsung & how many employees did that keep in a job?

The only reason people are so flippant about deflation is because CBs have ( so far) been so successful at preventing it.

If you think widespread systemic deflation is positive for a country/world explain how it has benefitted greece for last 5 years? Poster child for EZ deflation experiment.

Edited by R K

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I gave up buying stuff because it is so shit at the moment. I bought a toaster at Christmas it has failed already. I am on my third version of a tablet that is 4 months old and its a big brand one not a Chinese knock off.

I am so tired of returning stuff that doesn't work I am having second thoughts about buying anything at the moment. In many industries price has become the only focus,Planned obsolescence is now a ludicrously short time. Stuff is meant to be discarded within months.

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The concept of consumers holding off on purchases on deflationary expectations is complete nonsense.

The concept of TPTB lying to us to suit their agenda is complete nonsense too.....

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More relevant to the few mobile phone hold outs here are the twin effects of massive deflation on computer prices coupled with massive increases in capabilities (at least for those not running Windows :lol: ) over the last 20-30 years. Neither effect seems to have stopped lots of people buying computing devices inc. HPCers.

"I'll wait until I can get a Pentium for less" said no prospective Commodore 64 buyer in the early 80s ever.

Besides there is a ton of stuff you simply cannot defer...ahem...council tax, utility bills, food, travel and in many cases replacement appliances (not many outside HPC would put off replacing a broken kettle).

Where deflation really hurts is in discretionary spending and I suspect that's a large part of our modern economy.

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I don't have a mobile phone either......I thought I was the only person to have held out. I should have known there would be some fellow holder outers on HPC :)

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Deflation is a natural part of the business cycle. Since money is being created and destroyed simultaneously, the money supply is never conserved. What central bankers really fear is a Fisher-style debt deleveraging in which prices fall below the costs of financing production and/or servicing existing debt.

2% inflation means the banks have to be really dumb to not make 2%.

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Prolonged deflation destroys capital & employment.

But isn't deflation the raison d'être of a free market system? If the point of competition is to create downward pressure on prices then in a sense our system 'wants' to deflate- so it's goal seeking it's own demise?

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I can't imagine delaying a purchase in the way they mean.

If I need something - a kettle, clothes - I need it, and I'll go buy it. Waiting isn't really an option as it's going to mean I can't drink tea or I have to walk around naked.

If the marketers have got to me and I want something - a new computer, a camera, etc. - I'll go buy it if I can afford it and if I can't afford it I'll forget about it, or I'll buy a cheaper option. Either way I'll probably regret it.

I suppose the closest you get is with iPhone upgrades and similar - if they know there is going to be a better model next year, some people time their purchases so that they buy just after the latest model is released, to maximize the amount of time that they have the 'latest' model. However I'm not sure that the total number of iPhones bought is influenced by inflation one way or another. The value of the money used to buy the phone doesn't enter into most people's thinking. To a large degree, neither does the cost, frankly, when it comes to big-ticket lifestyle/fashion items like that.

This justification for inflation is nonsense. The real purpose of inflation is to continually erode the savings of ordinary workers so that they can't build up enough capital to challenge the position of the current elite.

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