Sunday, April 25, 2010

Inflation vs deflation

This article in The Economic Voice echoes what I've been saying for quite some time: the inflation issue is subject to market segmentation. Basics are costing more, luxuries are being sold at a discount. Though I suspect that luxuries of the very rich are another segment altogether.

Similarly, housing is segmented: the cost of basic stock in average income areas will, I think, decline in real terms, but the nicest property in the wealthiest areas may hold up OK. We're like different species in the sea, each with its optimum depth-habitat and ecosystem.


OldSouth said...

Good observation, and accurate. A friend whose business sells and installs very high-end toys for high-end wealthy clients is seeing his business grow dramatically.

I'm happy for him, a good man with a great family around him.

But the gap is are increasing, small luxuries are discounting.

AntiCitizenOne said...

In a recession
demand for lower cost items increases (driving up prices)
demand for higher cost items decreases (driving down prices)
A rather telling recession stat.

Since we taxpayers bailed out the rent-seeking classes it's not surprising they're doing rather well.

Sackerson said...

OS, thanks for the corroboration.

ACO - I think the cost of lower priced items is also going up because of the pound's weakness, which you laconically identified here on 7 Oct 2007: