From AD on the FOOL - on Deflation
Today I went into a store and bought a inflatable matress. A big one. Measuring 1.38x1.9 metres. It includes an electric air pump (which has a surprisingly high output) and several adapter nozzles.
In its entirety this cost me 30 Euros, and it wasn't even on sale, it was a regular price.
The matress was made in China of course.
I am continuosly amazed at how little any kind of hardware costs. How cheap this stuff has gotten. Just look at CD players, TVs, kitchen appliances, computers, toys. Yes I know a college education and health insurance is getting ever more expensive, but today you can buy a video recorder for 70 bucks, a dvd player for below 30.
Remember when you couldn't get a video recorder for under 300 dollars? When was that, just over a decade ago? Remember when this kind of purchase used to be an investment?
How much does cheap furniture cost today? How much did it cost 10 years ago?
Of course today there's five times the amount of digital sh!t you can buy (and you probably feel you must) so you will still feel strapped for cash.
But objectively, isn't it so that the vast majority of things that are being manufactured (now in China) have been getting cheaper and cheaper?
The only electronic component that still feels expensive to me is a digital camera. But just give it a few years and you'll be picking up good quality for 50 bucks.
I agree with Shilling here from a recent interview:
Shilling: Inflation perceptions are an issue that you have to look at psychologically. All of us inherently assume that anytime we buy something at a lower price, it's because we're great bargainers. We are really good shoppers. It's our effort. But if we buy something at a higher price, it's because the devil personified is ramming it down our throats. People have a tremendous bias towards seeing inflation—and not a balance of inflation and deflation—in the goods and services they buy. I find this even in professional investors who really ought to know better. When I ask, “What about computers, what about telecom services, what about airline tickets?” They say, “Well, yes, all those prices have declined.” But it's a begrudging admission. We know that, if anything, the indicators overstate inflation. They don't understate it. Economists have known it for years.
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