Recently I participated in an internet online forum with a person who subscribes to the Austrian school of economics. He claimed that there is no additional incentive to hoard money in a deflationary environment as compared to a environment of stable prices. So I came up with this investment decision example to show him that there is in fact a strong additional incentive to hoard money.
Here is the scenario:
I am an owner of a bread making factory. The factory makes loaves of bread at the rate of 1000 loaves per month. But I can improve the business process by hiring a consultant to improve the business process such that in one year the production rate will be 1100 loaves per month. The consultant will need to be paid 1200 pieces of gold for his services. Each loaf of bread is currently selling for 1 piece of gold . The prevailing deflation rate is 5%.
All revenue and cost numbers are in terms of pieces of gold.
With no improvement:
Year 1 Year 2 Year 3 Year 4
Loaves 12000 12000 12000 12000
Revenue 12000 11400 10830 10288
With improvement:
Loaves 12000 13200 13200 13200
Revenue 12000 12540 11913 11317
Net gain in gross margin (in terms of pieces of gold) due to improvement:
Year 1 = 0, Year 2 = 1140, Year 3 = 1083, Year 4 = 1028
Now let us consider the same project in an environment of stable prices (no inflation or deflation):
Revenue 12000 12000 12000 12000
Revenue 12000 13200 13200 13200
Year 1 = 0, Year 2 = 1200, Year 3 = 1200, Year 4 = 1200
Notice that my payback time for the deflationary environment will be a longer. This raises the hurdle to invest. All investments are risky. And the longer I have to wait to get paid back the more risky it is.
Conclusion: Deflationary expectations raise the incentive to hoard money.
I would say that depends on the level of deflation. A real normal deflation would have no impact in the incentive to hoard money. But..............
We can see that as the housing bubble burst investors are waiting and waiting (hoarding) until deflation in housing prices reaches a bottom ....................so they can invest.
Corporatism is using state means to enhance market share and profitability of a few favored firms, at the expense of the citizen.
The revenue in the first two charts goes down. It doesn't necessarily mean deflation. It is possible that consumers don't want bread. Investors therefore can put their money in butter. Why mess with it?
In a deflationary environment wouldnt either the consultant have to charge less for his services or either would his services would have to yeild a greater gain in order for the investment to happen. After all the starting points could not be the same if there are different expectations for the future.
In other words would deflation affect the costs of the investments (your starting point) as well.
Mansoor H. Khan:Conclusion: Deflationary expectations raise the incentive to hoard money.
Assume $1= 1 piece of gold for your example.
I hope I understand the problem you are presenting correctly, but the error in your reasoning is that you just assume the cost of initial investment of 1200 breads (for the consultant) to be $1200 in both cases. This isn't a valid assumption. Deflationary expectations would be factored in just like inflationary expectations are factored in today. The capital value of your initial investment is more likely to be worth $1028 according to your example and not $1200.
It is true however that people are likely to save more in the form of hoarding but for different reasons. One reason is that the money unit is to be expected to gain in value as oppose to lose in value as in today's inflationary environment. People won't have to constantly try to flee into investments they understand nothing about. You leave the riskier investments to those who have the most knowledge and not to sweet old granny.
DD5:Deflationary expectations would be factored in just like inflationary expectations are factored in today
What I was trying to say but more clearly stated.
Mansoor H. Khan:Deflationary expectations would be factored in just like inflationary expectations are factored in today.
Right. The question seems to be akin to Keynes' alleged "paradox of thrift." The market correctionary measure of deflation is seen as a bad thing where individuals are trying to respond appropriately to problems that the government created. Keynes loathed the virtue of savings and "thrift," believing that if people sacrifice by spending now and always instead of saving, the growth in the economy would reward them for their "contribution."
One problem I see with the chart is what are the other prices in the market doing? Going up or down? What about your costs too?
"The power of liberty going forward is in decentralization. Not in leaders, but in decentralized activism. In a market process." -- liberty student
Mansoor H. Khan: Recently I participated in an internet online forum with a person who subscribes to the Austrian school of economics. He claimed that there is no additional incentive to hoard money in a deflationary environment as compared to a environment of stable prices. .................."
Recently I participated in an internet online forum with a person who subscribes to the Austrian school of economics. He claimed that there is no additional incentive to hoard money in a deflationary environment as compared to a environment of stable prices. .................."
"..as compared to a environment of stable prices"
Although in Austrian theory all prices have a tendency to move towards the state of equilibrium [i.e stasis, or stability], I was under the impression that standard boiler-plate Austrian theory also points out that such an environment [i.e stasis, or overall price stability], does not/cannot exist in reality, and is only an artificial construct to be used when appropriate, if at all .
Your Austrian economist online friend would appear to be unwittingly comparing apples and oranges, and to have perhaps led you down the same road . Oh well.
Regards, onebornfree
For more information about onebornfree, please see profile.[ i.e. click on forum name "onebornfree"].
As I mentioned in your other thread, your analysis ignores the rising purchasing power of the money (in this case, gold). If I pay 1200 gold in year 1, this is not valued the same as 1200 gold in year 4. My accountant might assume that I need to earn back exactly 1200 gold in order to "break even," but this is not so. In your example, I'd only need to earn back 1028.85 gold in order to "break even", as the purchasing power of money has risen. Ceteris paribus (in other words, all places deflating equally—far departed from reality, but it simplifies the analysis), 1200 gold in year 1 buys the exact same amount of any good as 1028.85 gold in year 4.
onebornfreedotblogspotdotcom:Although in Austrian theory all prices have a tendency to move towards the state of equilibrium [i.e stasis, or stability], I was under the impression that standard boiler-plate Austrian theory also points out that such an environment [i.e stasis, or overall price stability], does not/cannot exist in reality, and is only an artificial construct to be used when appropriate, if at all . Your Austrian economist online friend would appear to be unwittingly comparing apples and oranges, and to have perhaps led you down the same road . Oh well.
Since I believe he was referring to me in the OP, I'll address this. I completely understand that the ERE is a fictitious construction, and this is exactly one of those scenarios where using it allows us a more cogent analysis of the effects of deflation/inflation. I mean, honestly, this whole example is horribly contrived and ignores millions of variables, but the basic principles we're analyzing still work when reality is resumed.
Life and reality are neither logical nor illogical; they are simply given. But logic is the only tool available to man for the comprehension of both.—Ludwig von Mises
Life and reality are neither logical nor illogical; they are simply given. But logic is the only tool available to man for the comprehension of both.
like the mythical unicorn, we will never see deflation.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
No, people attempt to keep the current amount of wealth on hand. So they have increase cash holdings to offset the decrease in the value of the currency. Keep in mind that it is not the value that matters but peoples perception of value or more importantly where the value is heading. So as inflation accelerates, people who prefer to hold cash naturally increase their holdings to keep up with inflation.
If a person can most effectively "invest" money by hoarding it, why is that a bad thing? The notion that deflationary trends are destructive to free enterprise is something that has been thoroughly discredited by the simple progress of technology. That I can buy the same computer for $50 today that I would have to spend $1000 on five years ago has not resulted in catastrophe for the consumer electronics industry. Rather, it has permitted people who could not afford certain products five years ago to buy them.
Moreover, people hoarding money results in less consumption/investment, which spurs producers to produce less, thus increasing the price level. In other words, in a free system, general deflation results in market forces which curb it. Thus, in an uncontrolled system (one in which there is no central actor attempting to force the price level), general deflationary trends will be short-lived and mild, as will inflationary trends.
As a sidenote, technological improvements will in general result in deflation. As production prices go down and quality rises, competitors will be driven to reduce prices, and as the level of technology rises, new frontiers of goods will be envisioned and implemented in order to take advantage of the relative increase of wealth of the average consumer and satisfy wants that the earlier consumer wouldn't be able to fill (and probably wouldn't even realize he had them). The breadmaker today benefits from cleaner water, indoor plumbing, electricity, and various other advantages that make his job much easier than it would be otherwise. An average consumer 100 years ago probably had no idea how useful, and how much of a game-changer the modern computer would be. The notion of a device capable of performing billions of mathematical operations per second would have been seen as visionary. Once the consumer gets a new good, he realizes a whole new bevy of wants that can be fulfilled. This process is endless.
Go back to your spreadsheet and calculate the bread maker's cumulative gain in loaves of bread (instead of gold), and how many loaves can the consultant buy with his 1200oz of gold after year 4. I see:
Cummulative 4yr Gain in Loaves (deflation): 3,793
Cummulative 4yr Gain in Loaves (no deflation): 3,600
Loaves to Consultant After Year 4 (deflation): 1,400
Loaves to Consultant after Year 4 (no deflation): 1,200
With deflation both the bread maker and the consultant end up with more loaves of bread after year 4 compared to a "no deflation" scenario. Gold deflation simply means bread inflation. And vice versa, gold inflation simply means bread deflation. Neither case says anything about people's incentive to invest, and in both cases both the bread maker and the consultant GAIN by their exchange of gold (loaves) for consulting services. Hope this proves that your conclusion is wrong.
Mansoor,
Those who are participating in this thread might benefit from full disclosure of your economic perspective. They can then decide how to proceed.
Mansoor H. Khan: chloe732: Mansoor H. Khan:I was an Austrian only just six months ago. Then I was challenged by a Keynsian. All the evidence fits. History is evidence. Current situation is evidence. All around us. I therefore accepted keynes' insights. A stunning conclusion. I would say exactly the same thing, accept my conclusion is that Mises and Hayek were right, not Keynes. Too bad you didn't put this in your original post. So, here is economics in a nutshell: 1) the market is unstable, driven by animal spirits, 2) a commodity based monetary system is barbaric, 3) the central bank provides stability, 4) government intervention is required to prevent economic catastrophe, or, to "smooth out" the natural business cycle, 5) printing money creates prosperity, 6) deficit spending creates jobs, 7) too much saving is bad because it can cause a deflationary catastrophe, 8) the government can determine how much saving is appropriate and then enforce the correct amount of saving through democratic means. Did I miss anything? Except the animal spirit part. I reject this notion.
chloe732: Mansoor H. Khan:I was an Austrian only just six months ago. Then I was challenged by a Keynsian. All the evidence fits. History is evidence. Current situation is evidence. All around us. I therefore accepted keynes' insights. A stunning conclusion. I would say exactly the same thing, accept my conclusion is that Mises and Hayek were right, not Keynes. Too bad you didn't put this in your original post. So, here is economics in a nutshell: 1) the market is unstable, driven by animal spirits, 2) a commodity based monetary system is barbaric, 3) the central bank provides stability, 4) government intervention is required to prevent economic catastrophe, or, to "smooth out" the natural business cycle, 5) printing money creates prosperity, 6) deficit spending creates jobs, 7) too much saving is bad because it can cause a deflationary catastrophe, 8) the government can determine how much saving is appropriate and then enforce the correct amount of saving through democratic means. Did I miss anything?
Mansoor H. Khan:I was an Austrian only just six months ago. Then I was challenged by a Keynsian. All the evidence fits. History is evidence. Current situation is evidence. All around us. I therefore accepted keynes' insights.
A stunning conclusion. I would say exactly the same thing, accept my conclusion is that Mises and Hayek were right, not Keynes. Too bad you didn't put this in your original post.
So, here is economics in a nutshell: 1) the market is unstable, driven by animal spirits, 2) a commodity based monetary system is barbaric, 3) the central bank provides stability, 4) government intervention is required to prevent economic catastrophe, or, to "smooth out" the natural business cycle, 5) printing money creates prosperity, 6) deficit spending creates jobs, 7) too much saving is bad because it can cause a deflationary catastrophe, 8) the government can determine how much saving is appropriate and then enforce the correct amount of saving through democratic means.
Did I miss anything?
Except the animal spirit part. I reject this notion.
You went on to agree with "Economics in a Nutshell". That is your persective, right? It is simply not possible to untangle your beliefs about deflation until you address the shortcomings in your overall economic understanding. Numbers 1 through 7, above, are economic fallacies, and #8 is a fiction you created on your own. This website has the resources to guide you out of this muddle, if you wish. Many here are ready and willing to guide you. The choice is yours.
"The market is a process." - Ludwig von Mises, as related by Israel Kirzner. "Capital formation is a beautiful thing" - Chloe732.
chloe732: Mansoor, Those who are participating in this thread might benefit from full disclosure of your economic perspective. They can then decide how to proceed. Mansoor H. Khan: chloe732: Mansoor H. Khan:I was an Austrian only just six months ago. Then I was challenged by a Keynsian. All the evidence fits. History is evidence. Current situation is evidence. All around us. I therefore accepted keynes' insights. A stunning conclusion. I would say exactly the same thing, accept my conclusion is that Mises and Hayek were right, not Keynes. Too bad you didn't put this in your original post. So, here is economics in a nutshell: 1) the market is unstable, driven by animal spirits, 2) a commodity based monetary system is barbaric, 3) the central bank provides stability, 4) government intervention is required to prevent economic catastrophe, or, to "smooth out" the natural business cycle, 5) printing money creates prosperity, 6) deficit spending creates jobs, 7) too much saving is bad because it can cause a deflationary catastrophe, 8) the government can determine how much saving is appropriate and then enforce the correct amount of saving through democratic means. Did I miss anything? Except the animal spirit part. I reject this notion. You went on to agree with "Economics in a Nutshell". That is your persective, right? It is simply not possible to untangle your beliefs about deflation until you address the shortcomings in your overall economic understanding. Numbers 1 through 7, above, are economic fallacies, and #8 is a fiction you created on your own. This website has the resources to guide you out of this muddle, if you wish. Many here are ready and willing to guide you. The choice is yours.
The best rebuttal to the above was given by Krazy Kaju in my previous past about Too Much Thrift. He said that producers of money (coinage) in this case would rush to find and produce more gold and this would keep going until their was no more profit in doing so.
I wanted one of you guys to say that so I could give the following reply.
Yes. Krazy Kaju is right and if there was not enough gold available and populace would probably switch to other metals or maybe paper with multiple currencies operating in the land. My question to the Austrian community is this: If this occurred would we not repeat all the history of money and be eventually be back to today' s money (i..e., bits in a computer) because it is the most convenient form of money and because I don't have to carry it around and count it and protect it from physical theft?
Mansoor
caravelle: "Keep in mind that it is not the value that matters but peoples perception of value..." whats the difference?
"Keep in mind that it is not the value that matters but peoples perception of value..."
whats the difference?
Perceptions on average over time need to match reality. All else we will get screwed.
This oversimplification is absurd. You arbitrarily set prices, costs, demand conditions, and the deflation rate. What are we supposed to do with this nonsense?
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
caravelle: Perceptions on average over time need to match reality. i dont see how that realtes to what i asked??
Perceptions on average over time need to match reality.
i dont see how that realtes to what i asked??
You'r implying that there is no such thing as value and only perceptions of value.
What I am saying is if economic actors don't on average act according to reality you will have disaster? In other words. Perceptions do not trump reality. But Reality will trump perceptions if perceptions are not on average in line with reality to a sufficiently extent.
Got it?
Mansoor H. Khan:Got it?
No.
wilderness: Mansoor H. Khan:Got it? No.
its simple. Just give up eating. You will eventually reach a point where you will see the difference between perception and reality:
A: Perception = I don't need to eat to stay alive
B: Reality = You do need to eat to stay alive
A and B are not compatible. No matter how much I perceive B as A. If you don't believe me. Try the experiment!
Mansoor H. Khan: wilderness: Mansoor H. Khan:Got it? No. its simple. Just give up eating. You will eventually reach a point where you will see the difference between perception and reality: A: Perception = I don't need to eat to stay alive B: Reality = You do need to eat to stay alive A and B are not compatible. No matter how much I perceive B as A. If you don't believe me. Try the experiment!
but I gave up eating, so, I don't need to eat to stay alive.
wilderness: Mansoor H. Khan: wilderness: Mansoor H. Khan:Got it? No. its simple. Just give up eating. You will eventually reach a point where you will see the difference between perception and reality: A: Perception = I don't need to eat to stay alive B: Reality = You do need to eat to stay alive A and B are not compatible. No matter how much I perceive B as A. If you don't believe me. Try the experiment! but I gave up eating, so, I don't need to eat to stay alive.
We can go on and on with verbal games. You won't know the truth until you experience it. Just give up eating.
Mansoor H. Khan:We can go on and on with verbal games. You won't know the truth until you experience it. Just give up eating.
that's what you told me to do. you said "just give up eating". How can a person who has given up eating - how can they eat?
This is a real philosophic discussion believe it not.
wilderness: Mansoor H. Khan:We can go on and on with verbal games. You won't know the truth until you experience it. Just give up eating. that's what you told me to do. you said "just give up eating". How can a person who has given up eating - how can they eat? This is a real philosophic discussion believe it not.
I care about hunger, pain, suffering, staying alive, bad dudes in the world trying to get me, cold in the winter, etc and not:
"This is a real philosophic discussion believe it not."
Mansoor H. Khan: wilderness: Mansoor H. Khan:We can go on and on with verbal games. You won't know the truth until you experience it. Just give up eating. that's what you told me to do. you said "just give up eating". How can a person who has given up eating - how can they eat? This is a real philosophic discussion believe it not. I care about hunger, pain, suffering, staying alive, bad dudes in the world trying to get me, cold in the winter, etc and not: "This is a real philosophic discussion believe it not."
We were not talking about caring. Now you've changed the discussion, again.
I had asked, how can a person who has given up eating - how can they eat?
wilderness: Mansoor H. Khan: wilderness: Mansoor H. Khan:We can go on and on with verbal games. You won't know the truth until you experience it. Just give up eating. that's what you told me to do. you said "just give up eating". How can a person who has given up eating - how can they eat? This is a real philosophic discussion believe it not. I care about hunger, pain, suffering, staying alive, bad dudes in the world trying to get me, cold in the winter, etc and not: "This is a real philosophic discussion believe it not." We were not talking about caring. Now you've changed the discussion, again. I had asked, how can a person who has given up eating - how can they eat?
My Perception: keynsianism is helping the populace
Your Perception: keynsianism is screwing the populace
If perceptions only matter and there is no such thing as objective reality.
Then. we are both right. And this discussion can be ended right now!
Mansoor H. Khan: My Perception: keynsianism is helping the populace Your Perception: keynsianism is screwing the populace If perceptions only matter and there is no such thing as objective reality. Then. we are both right. And this discussion can be ended right now!
Mansoor. I ask of you. Focus. Please focus.
I asked one question. You brought up 'caring'. And now you're talking about this keynesian and objective reality, etc....
Why can't you stick to the topic? How can a person who has given up eating - how can they eat?
wilderness: Mansoor H. Khan: My Perception: keynsianism is helping the populace Your Perception: keynsianism is screwing the populace If perceptions only matter and there is no such thing as objective reality. Then. we are both right. And this discussion can be ended right now! Mansoor. I ask of you. Focus. Please focus. I asked one question. You brought up 'caring'. And now you're talking about this keynesian and objective reality, etc.... Why can't you stick to the topic? How can a person who has given up eating - how can they eat?
Look. I am learning that Austrian's whole way of thinking revolves around the belief that perceptions only matter. If that is the case what is motivation to run a website called mises.org and try to influence perceptions/opinions?
If there is no objective truth then why discuss anything and why run a website called mises.org? If in fact there is truth then lets talk about it and stop playing verbal games.
Mansoor H. Khan:I am learning that Austrian's whole way of thinking revolves around the belief that perceptions only matter. If that is the case what is motivation to run a website called mises.org and try to influence perceptions/opinions?
People have subjective values concerning economic transactions or economic evaluations but that doesn't infer that the whole world is subjective and therefore nihilistic. One can believe in objective reality and subjective consumer preference.
'Men do not change, they unmask themselves' - Germaine de Stael
Mansoor H. Khan: You'r implying that there is no such thing as value and only perceptions of value. What I am saying is if economic actors don't on average act according to reality you will have disaster?
What I am saying is if economic actors don't on average act according to reality you will have disaster?
What is value then , if not subjective value? Can a loaf of bread "actually" cost 3000 if there's no one willing to pay more than 1200 for it?
I think this is the root of your problem. A loaf of bread in year 3 is still, like always, SUBJECTIVELY valued by people who need it relative to other goods, and not by starting with a year 0 price of 1200 and deflating it by 5% for two consecutive years. You (like Keynes) keep thinking in aggregates.
Aggregate deflation and inflation are only calculated as smokescreens in a world of central banking and monopoly money. In a free market, gold deflation simply means loaves inflation -- the value of each unit of good/service (pound of nails, oz of gold, loaf of bread, hour of massage) fluctuates in relation to the rest, thus inflation in X is, by definition, deflation in Y.
In a free market, it is the SUBJECTIVE preferences of economic actors that create the REALITY of relative prices of goods and services (How many hours of massage for a loaf of bread?). Hence, by definition, the free market IS reality.
Now, if you introduce an entity that coerces all actors to use its fiat paper as the only legal tender, then goes ahead and manipulates its supply at will, THEN you need to start worrying about prices of things fluctuating way above and below "reality". But you call this desirable, for some reason.
Z.
Andrew Cain: Mansoor H. Khan:I am learning that Austrian's whole way of thinking revolves around the belief that perceptions only matter. If that is the case what is motivation to run a website called mises.org and try to influence perceptions/opinions? People have subjective values concerning economic transactions or economic evaluations but that doesn't infer that the whole world is subjective and therefore nihilistic. One can believe in objective reality and subjective consumer preference.
Life and reality are neither logical nor illogical; they are simply given. But logic is the only tool available to man for the comprehension of both" - Ludwig von Mises.
Ok. good. we are getting somewhere. What happens if consumer preferences are NOT in line with objective reality? Do you see an issue there?
This
Mansoor H. Khan:Look. I am learning that Austrian's whole way of thinking revolves around the belief that perceptions only matter. If that is the case what is motivation to run a website called mises.org and try to influence perceptions/opinions? If there is no objective truth then why discuss anything and why run a website called mises.org? If in fact there is truth then lets talk about it and stop playing verbal games.
I'm not playing a verbal game. I asked a question in order to see if you will give a response to something that is meaningful. I'm trying, if you want to call it such, to do an exchange with you. I'm trying to come to an agreement, no matter how small, to build upon that agreeable foundation and then maybe we can develop further upon it. If I ask you this, what color is a red apple - how will you respond? Or how about this? You ask me a question. I'll give you a straight answer instead of jumping all around, deal? But give me a question as simplistic as the red apple example. Something you and I can both agree upon.
Mansoor H. Khan: Recently I participated in an internet online forum with a person who subscribes to the Austrian school of economics. He claimed that there is no additional incentive to hoard money in a deflationary environment as compared to a environment of stable prices. So I came up with this investment decision example to show him that there is in fact a strong additional incentive to hoard money.....Conclusion: Deflationary expectations raise the incentive to hoard money.
Recently I participated in an internet online forum with a person who subscribes to the Austrian school of economics. He claimed that there is no additional incentive to hoard money in a deflationary environment as compared to a environment of stable prices. So I came up with this investment decision example to show him that there is in fact a strong additional incentive to hoard money.....Conclusion: Deflationary expectations raise the incentive to hoard money.
Not that it matters [after all, in the long run we are all dead] but I believe you might be confusing cause with effect.
A Definition: Deflation = Increasing Per Unit Purchasing Power
As far as I am aware, the term "deflation" refers to an economic situation in which the general per unit value of the medium of exchange is increasing beyond previous levels relative to almost everything else [other goods, services] in production. [ie there is a steady increase in per unit purchasing power- less units now buy more goods/services than before].
[If you are using an entirely different definition then what follows below is probably irrellevant.]
Final Per Unit Value = Final Outcome of Supply and Demand factors
As LVM has shown, as with anything and everything else produced, at any point in time, the final purchasing power [ie price, or value] of a single unit of money is always the outcome of just two factors: [1] present supply of that unit, and [2] present demand for that unit.
Therefor, in a deflationary environment , the present demand for the supply of the unit of currency exceeds the present supply,[ for whatever reasons] but likely including a general hoarding preference by the majority of the population.
To put it another way, the desire by the majority of individuals to acquire and hold currency units [instead of spending them] is increased [ie there is an increased demand] to the point where that the total , present, collective demand outstrips the present supply of currency units.
Example: the money supply is being increased above previous production levels , but the demand for that increased supply [for whatever reasons] is still greater than that increased supply - therefor, increased supply, plus even more demand that outstrips that increased supply causes the economic effect of an increase in per unit purchasing power ,a deflationary, or at the very least disinflationary,* scenario.
Cause and Effect
Therefor, the hoarding of money [ie an increase in the general desire to hold cash instead of spending it], is a cause of deflation [ie an increase in per unit purchasing power] - a factor involved in producing the economic effect usually called "deflation", not really a result of it.**
Why a Deflation?
The question then becomes: "what would cause a majority of people to change their behaviour and choose to hold onto more cash [causing deflation- or an increase in per unit purchasing power], instead of spending as freely as they have in the past?"
Anyhoo, thats my twisted logic
Regards, onebornfree.
.*"Disinflation"= a decrease in the rate of inflation
**Of course, once this hoarding behaviour is set in motion, that hoarding of money does become a self-fulfilling prophecy to an extent- up to an [undeterminable] point, money hoarding will encourage more hoarding.
P.S. Regardless of how you and I define deflation, and regardless of what measures you envision that can/will prevent/discourage the hoarding of money and promote its supposedly beneficial free circulation instead, and regardless of who it is you envision as being in charge of carrying out those envisioned measures , those envisioned measures will ultimately fail, as the market finally corrects and adjusts to them, perhaps as viciously, or perhaps even more viciously, than it is doing right now in its response to certain, er, "measures" already taken.