No good?

Very well. Off course the materials and labor to produce them has dramatically reduced too. Due in no small part to the investment the industry was able to procure. If you can make a product cheaper today than you could yesterday and your competitors can too your price drops. It doesn't imply your profits are. Ask yourself why the electronic industry can still get people to invest in it. Are they all just philanthropists?

Price decrease due to deflation is very different to price decrease due to a reduction in costs.

the computer industry is not a good example of deflation imo

computer prices fall in real terms, e.g. computers become less expensive relative to potatoes

deflation is about systemic falling nominal prices, e.g. both computers and potatoes become less expensive relative to dollars

not saying that your conclusion is wrong, just that it doesn't follow from your argument

Actually, computer prices fall in nominal prices, as well, and have since their advent.

Right, but it is clearly not the same thing as systemic deflation.

Hardware costs
1961: about US$1,100,000,000,000 ($1.1 trillion) per GFLOPS
1984: about: US $15,000,000 per GFLOPS
1997: about US$30,000 per GFLOPS
2000, April: $1,000 per GFLOPS
2000, May: $640 per GFLOPS
2003, August: $82 per GFLOPS
2006, February: about $1 per GFLOPS
2007, March: about $0.42 per GFLOPS
2007, October: about $0.20 per GFLOPS

Should be down to about $0.08/GFLOPS these days.

Or, dollars become more expensive (costly to obtain) relative to everything else.

A systemic deflation is simply the normal operation of the market economy in the absense of exogenous increases to the money stock. Prices should fall in general as they do in the computer industry (not nearly so fast, of course; there is a gigantic competitive space available in that industry that is not available in the potato industry, for example). There would be no more aggregate economic problem in any other industry, or all of them, than there has been in the computer/personal electronics industry.

That may be true, but if every good falls in price together each industry does not benefit in the same the computer industry does when the price of computers falls relative to the price of every other good.

In the first case, consumers maintain their purchasing patterns. In the second case, consumers increase their consumption of computers and decrease their consumption of other good.

Edit: Actually, not quite.

Because of the general decline in prices, consumers could increase their purchases of consumers WITHOUT decreasing their purchases of other goods. In fact they could INCREASE their purchases of BOTH.

That's the whole point of increasing productivity and economic expansion.

I'll take b) for "what happens when everyone goes to the bank to take out their cash?"

Can someone explain why the US government hasn't just been printing its own money over the last century, rather than getting another company (the fed) to do it for them, borrow that money and then pay interest on it (and then implement income tax to repay the interest owing to the fed)

It's easier to blame others that way. It's a politician's dream.

It would be blatantly unconstitutional that way.

Because the bankers wrote the Federal Reserve Act.

How so?

I'm not saying its constitutional, but isn't that what happens, and if so -why

Because this way is better, IF you're interested in money, power, looting, etc. It's the European/British model that they wanted to bring the US since the beginning.

"It was Hamilton who fathered the idea of a central bank run by politicians in the nation’s capitol. As such he is America’s founding father of central banking and all the economic miseries it has created, from the Great Depression to stagflation to the bursting of the latest housing price bubble."
http://www.lewrockwell.com/dilorenzo/dilorenzo136.html

http://en.wikipedia.org/wiki/Alexander_Hamilton

If it doesn't A loses money. And the total amount of money available = 100oz still. What I don't get is why is that, if money has just been created out of thin air by the bank?

No. The 100oz still exists. B has none of it. The bank has 10oz of it and whomever B traded with has the other 90oz. Now if B had been had been able to pay the debt of (by selling the fruits of his labor for instance) then we do in fact increase the money supply. A has 100oz in the bank. The bank has A's gold tucked in its vault and B has 90oz. Voila we have turned 100oz into 190oz. Not by magic and not by simply printing more money.

In your scenario only demand increased.

It stimulates sustainable growth at a faster rate than any others yet invented

But ABC money is going down in value, XYZ are causing inflation right?

Sigh. Last time.

Person A deposits 100oz. He has 100oz in his account. The bank tells him he can write checks totalling 100oz. The bank also loans 90 of those ounces to B. They give him a checkbook and tell him he can write checks totalling 90oz. There are now 190oz of checkbook money that can be spent. If you cannot see how the supply of fiduciary media has been increased, I don't have time to explain it 50 times.

Start thinking and stop arguing not to lose an argument on the internets.

Once would be enough.

On ignore for trolling.

Try putting yourself on ignore and see if you pop out on the other side.

Just to clarify I'm not really interested in fractional reserve banking in this thread. My OP was in regards to how the federal reserve prints money.

Nice self-contradiction here. M2 counts time deposits.