Has internet contributed to deflation in the developed world?

Nowadays there is a lot of debate going between inflation and deflation, most of the pundits believe we are heading for inflation or even hyperinflation, some believe we are in deflationary environment. Eventually we will find out what happens but one thing seems certain that we have been in a deflationary environment for quite a while now.

There are many reasons for deflation, I am sure you will get as many answers as how many people you ask. Deflation is complex and it happens rarely and there are many reasons for deflation and we don’t have enough experience dealing with deflation. Let us examine the impact of internet on deflation?

Without doubt invention of internet is one of the greatest inventions of last century. How has invention of internet impacted us?

1.   You have access to vast amount of information like never before.  Knowledge is power and nothing has served human race better than knowledge.

2.   It has increased the productivity many folds, most of us when we need syntax or need any information we search it and most often we find our answers right away.  This is tremendous increase in productivity; Increase in productivity should transfer to better standard of living?

3.   It has connected citizen of countries around the world, truly making it a global village. There is a greater dialogue between people and they are not strangers anymore, this is helping in bridging the gap and useful tool for peace.

4.   We can bank online, shop online and so on and this is huge increase in productivity.

5.   I can go on and on………

How is this deflationary? Let’s explore it

1.   Internet allows us for price discovery which is a good thing but it is deflationary. We can buy products from companies around the world which increases the competition and reduces price.

2.   Nowadays most people get their news on internet which means newspapers; publishing industry is going out of business.

3.   Most of the people watch TV/News on internet which means cable business is in trouble.

4.   When we bank online, we are reducing the need of brick and mortar shop.

5.   I can go on and on…………………

Feel free to leave your comments. Let us explore Inflation Vs deflation in the next article.

Thanks for reading.