Pundits are never satisfied. When inflation is
high they tell us that it is ruining civilization as we know it.
When it is low they tell us that deflation is a possibility and
that if deflation hits us, we may be on our way to hell in a hurry.
It is an ill wind indeed which blows no man any
good. I have a friend who built a comfortable life on inflation.
I’m not going to tell you how to do it because I don’t
think it is a very good idea. It can, however, be done. At least
one form of deflation, on the other hand, seems to me to be a
very good idea. When a company wants to increase its profits (and
what company in its right mind does not), it usually investigates
the possibility of raising its prices. If it can, it usually will.
That benefits the particular company, at least for a while. If
the price increase joins with other price increases to cause significant
inflation, very few people are going to see any benefit.
If, on the other hand, the company seeks to increase
its profits by increasing sales, the extra volume of sales will
improve profits and allow for a price reduction. With a price
reduction, everyone gains. If enough U.S. industries managed to
effect significant price reductions, we would have a healthy deflation.
Everyone’s standard of living would rise. We would have
a strong dollar without damaging overseas sales. We might even
be able to export enough to get rid of our balance of payments
deficit. What a radical thought.