Sadly, it also guarantees profits and wages go along for the ride. First, falling prices are not cool, unless you’re an old retired snort on fixed-real time transaction reporting system investopedia forex government dole. But even so, it’s unlikely you’ll be buying big-ticket items with declining pricetags, as opposed to food and crap from China.
So, this is still not a good gig. Falling prices, as with houses now in Calgary, make reasonable people delay their buying decisions. Consumer spending goes down, and the economy along with it. Canadian GDP is based on consumers, and almost a quarter is directly tied to residential real estate. Second, when people spend less, businesses make less. They cut back on their own spending.
Or they tell people their wages and salaries will be decreased, as is now happening in the oil patch. Or they make employees become contractors, without benefits. Third, when prices fall so do profits. Look at the banks, several of which were downgraded this week by analysts who understand what lower mortgage rates and less consumer spending means. So they have to cut overhead. Like CIBC, which trashed its IT department and punted 500 employees. As a result, and the fourth component of deflation, employment falls and consumer spending follows.