Increasing deployment of computing technology is a cause of deflation, by Simon. The bureaucrats at the world’s central banks have set interest rates near zero (even below zero) throughout the western world, which makes capital appear really cheap. Cheap capital means robots and computers are relatively cheap — take a loan to buy them, and there is little interest to pay.
As a recent economics article put it: Is The Fed Helping Robots Find Jobs? Yes it is. And it is a good thing because it helps reduce the cost of a given amount of output. At an accelerating rate. We have already done this with farming….
Well I hate to say it because I hate Nixon with a purple passion. But his idea of a guaranteed minimum wage is the least distorting economic policy. In that regard it might also be a good idea to take away the control of the economy from the bankers. Their main interest (heh) is the banks. And banks throttle economies because they favor the INs over the OUTs. A very bad idea when we have accelerating exponential technological advances. Well we could have more of those advances if the bankers weren’t strangling the economy.
By the way, the main explanation for deflation is that the world cannot take on more debt because in about 2008 we ran out of income to service more debt and we ran out of unencumbered assets to use as collateral. The world is staggering under massive debt levels compared to any time in the past (see the graph), so people tend to pay off existing loans rather than take out new ones. Paying off a loan decreases the amount of money in the economy, thereby causing deflation.
But the rise of robots is certainly an contributing cause of deflation, and will be for a long time. As Simon wonders, do the bankers take it into account?