The economy works this way; when there's a saver there also must be a spender to allow the economy to function. The economy can not function properly when everyone wants to save and not spend. We have had episodes of this during the Great Depression of 1929 in the US where price deflation ensued after the stock market crashed as well as the Great Financial Recession of 2008, because everyone wanted to save money, to save whatever they have left. What is interesting in Europe and is also happening in Japan in 1985 was that, after the dot.com bubble crash of 1999 and the 1985 crash of the Japan real estate market, the German and the Japanese private sector evolved from net borrowers into net savers and they do so to repair their own balance sheets. I think the Germans even changed the name of the stock market to TecDax just to forget the trauma that many people lost their shirt in the tech bubble. Most other European countries were net borrowers until the Great Financial Recession which collapsed their own real estate economy, thus turning them from net borrower and spenders into net savers. I think the sour experiences of these bubble crashes had caused the private sector in Europe to continue to save rather than borrow. So the used computer market in Europe behaves somewhat differently than the used computer market in the US and Canada where our economic policies allowed the private sector to be net borrowers.
What I am saying is that with the private sector, the transition from a net borrower to a net saver will cause a deflation in asset prices, and that is because the amount of debt will stay the same irregardless of any economic malaise including this pandemic. Post Covid19, the private sector will have to service the same debt, but because the demand side will be curtailed because that is what people will do, switch from borrowing and spending to saving, the supply side of the economy will have to match demand. The supply side of a used computer expects people to pay on pre-Covid 19 prices. That's not going to happen, especially if it was inflated because people can borrow money that they don't have. Europe is a bit different. Prices are reflected based the people's cashflow ability to pay. That's real money, real cash you have so if it's a $50 Mac Mini in Europe is based on cash savings. Whereas in US and Canada, the $50 Mac Mini is based on monetary stimulus -- borrowed money and once people stopped borrowing, they will switch to saving and building up that war chest. It is during this build-up is when deals can be made on items on distress prices. Even before Covid19, I was doing some sales figure projections for the thrift store organisation (I was actually promoted to a managerial position due to my experience in this economic stuff before I was laid off due to Covid), I was already projecting and observing that a lot of people were spending more cash than credit. And this is basically an early warning sign that people's ability to borrow had maxed out or they were nervous that interest rates had gone up so fast that they worry they are unable to service their debt. This is a net borrower mentality. If you are a saver and have good cash flow, you would actually borrow money with cheap rates and buy and invest and earn over the spread in interest. That's how I would do business, but someone who borrows money with poor cashflow is cashflow negative. And that is why government is basically giving money to people right now. Yes, the stimulus can help but it is temporary. Eventually, people who borrow money need to deleverage and that usually entails selling off non-performing assets, which can include collections and things that don't help their cashflow. And it is already happening in the US and Canada even before Covid19. Covid19 is basically an accelerant to a beginning fire sale on distress asset.
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