The prices of durable goods have been falling pretty steadily since peaking in 1997, and now they are as cheap as they were in 1988, after adjusting for the constant improvements manufacturers have been making to their products.
What’s striking is how pervasive the price declines are. It’s not just a few items that are pulling down the average; prices are falling for almost every sort of durable good that consumers buy.
There are 2 reasons that prices fall.
In times where efficiency or productivity or new processes or newly discovered, easily accessible resources are having their major effect, the prices of the products or services they provide will fall because the absolute cost of making them is being actually reduced, but this study accounts for those improvements. There are no new processes or massive new resources being discovered and put into service, especially not across the board.
And the lastest survey of American productivity show that it is falling, not rising.
There is another reason that prices fall and that is when the incomes of the customers fall. And in real terms, American incomes, except for the 1%, are about the same as they were in the 1980's. So prices have to fall to match them.
The reason they have not fallen earlier is that the difference has been made up with debt. But consumers have finally reached the point where they can no longer fool themselves into taking on more debt, or they are just plain maxed out, even by the corrupt standards of the banking system.
The second case has another facet; it is the indicator of a deflationary economy.
As wages fall, prices have to chase them down, but because each seller is still trying to maximise their profit, then their income, then finally their survival. Because they try to brake their fall, the prices always remain higher than the customer can actually afford so they inch down some more, preceded by the wages that companies pay their workers who are then supposed to be able to keep buying the products they make.
This is a deflationary spiral and the next phase is the failure of the companies that make this stuff. People like The Automatic Earth, Steve Keen, Chris Martenson etc have been predicting this for over a decade and the process is playing out pretty much according to their models. But those who are terrified of deflation, and that should be all of us, WILL NOT talk about it honestly.
If we refuse to talk about it, we can't even attempt to deal with it. So will will have to face it alone. NOT a good scene.