Value Deflation
Candlefocus EditorAlthough the prices of products may remain the same, when businesses engage in value deflation, it artificially keeps inflationary pressures in check because the prices of the product remain the same, even though the customer is getting less for the same price. This type of inflation is often not realized or reported by statistical agencies, as they only measure the prices of services and commodities, rather than the overall value of the product.
Bogus deflation is a related phenomenon, where businesses temporarily lower prices - without providing customers with increased value - in order to stimulate demand or clear out inventory. This type of deflation is not a genuine decrease in prices representing increased value, but rather a strategy employed to manipulate consumer behavior or to another goal.
In the end, value deflation can lead to economic stagnation, as consumers will be less likely to purchase items which no longer provide the same level of value for the same price. This can result in reduced sales for businesses and lead to an overall decline in the economy. Furthermore, when statistical agencies don’t measure this type of inflation, it can give a skewed view of the overall health of the economy, creating a false sense of security or complacency in policy makers.
Overall, value deflation is a form of inflation that should be accounted for in order to paint an accurate picture of the true economic health of a nation, and to ensure that businesses are not exploiting their customers by reducing the quality of their products without decreasing their prices.