Sunday, December 6, 2015

Supply side and Demand side deflation

Both exist. How long will both exist? This is unknown. From the supply side you have oil deflated which is driving oil businesses and shale oil miners and oil drillers out of business world wide. Then from the demand side you are having things like Iphone compiling various applications that in the past you needed to buy several devices (more expensive than an Iphone) to have the use of.

Then you have companies like Amazon.com putting out of business one by one storefronts worldwide. Why are they putting storefronts out of business? One word. Overhead. IF you don't have to rent or buy a storefront and hire stockers And salespeople then by not paying sales people and instead selling online instead of hiring sales people you just hire people building websites that have pictures of what you want to buy then storefronts CANNOT compete with online sales without going out of business worldwide because of OVERHEAD.

This also creates deflation as storefronts try to compete but really can't.

But then, you have people who want to see in person whatever they are buying often who need storefronts for some things to be sure they don't have to return things 10 times before they find something they actually want to keep in their size. This mostly is in regard to clothing.

So, this storefronts versus online businesses type of business war is liable to get worse and worse over time until there are very few storefronts at all left in the developed world. However, some people are social and won't buy from a website and might prefer to buy it from a person that they can talk to.

All these factors go into Supply side and Demand side deflation.

However, this Christmas season point of sale and online sales are going through the roof as prices decrease.

However, my thought is that lower oil prices allow lower sale  prices too of items because of both shipping and buying the energy to manufacture goods.

So, both types of deflation are decreasing prices while putting out of business oil drillers, shale oil miners and to some degree Storefront businesses around the world.

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