Re: A tragedy? @ Messrs Spartacus & Tick
If I might throw another dog or two on the fire, low inflation may be a good thing, negative real interest rates are most certainly not
You're a bit hard on the poor old doggies there...
As a general rule you are correct. Negative real interest rates are bad (i.e. interest rates below inflation). This is probably the main cause of the Euro crisis - when French and German inflation and growth were both down around 1-2% in the early 2000s, ECB interest rates were way too low for countries like Ireland and Spain. Causing runaway housing booms - which now means they need lower interest rates than say Germany.
However after the last recession we needed to generate inflation. Yes we needed to generate growth, to get out of recession. But was also needed to generate inflation itself. The reason for this often offends purveyors of the morality-play that Germany has deployed in the Euro-crisis, "poor savers must be protected from inflating away the debts of the feckless". There may even be some justice in that - however it's economically disastrous. As Keynes pointed out. If you have no inflation, then people with debts go bust, and they take the economy with them. That's the disaster of deflation. So the savers (owners of that debt) may complain that they're not getting their full pound of flesh, but what they don't realise is they face a stark choice. Debts that can't be paid, won't be paid. So they're better to accept a bit of inflation eating away at the principal and still getting interest plus repayments - because the alternative is the debtor going bust, and them getting nothing. Once that happens at a national scale, you get a 1930s style depression. So by generating inflation and stopping all the banks going bust, what our central banks did was to pass a bit of pain to the savers so that the borrowers didn't go broke and send the economy into a death-spiral.
Look how it took the Japanese central bank 3 years of insanely massive money-printing and government spending (Abenomics) in order to force their economy to start generating inflation again. Plus all the shorter and less extreme programs of government spending and QE they've done over the last 20 years that failed.
Your second point about deflation in the tech industry seems to be a misunderstanding / confusion of terms.
Deflation in the macro-economic sense means a rising in the value of money. Just as inflation is a fall in the value of money. And it truly is doom-ageddon. Once triggered it generates its own expectations, which cause it to continue. And the way to beat it is economically irrational, so the market can't easily get out of it without massive government intervention.
When you talk about deflation in the computer industry, you're actually talking about productivity rises. Society being able to produce more stuff with the same input of resources, due to new technology, automation and economies of scale. That's the best kind of economic growth.
If that happens in enough industries at once, it might cause deflation in the overall economy - such as in the 1870s - which if vague memories of my 19th C economic history serves, was down to globalisation (in food in particular) causing a long period of wage stagnation lack of investment. Deflation is the enemy of investment, and investment is what tends to fund productivity growth - which is what makes us better off by getting us more stuff for less effort.