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Topic: Deflation (economics)


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  Deflation (economics) information - Search.com
Deflation is generally regarded negatively, as it is a tax on borrowers and on holders of illiquid assets, which accrues to the benefit of savers and of holders of liquid assets and currency.
Since deflation discourages investment and spending, because there is no reason to risk on future profits when the expectation of profits may be negative and the expectation of future prices is lower, it generally leads to, or is associated with a collapse in aggregate demand.
Deflation is, however, the natural condition of hard currency economies when the rate of increase in the supply of money is not maintained at a rate commensurate to positive population (and general economic) growth.
www.search.com /reference/Deflation   (3931 words)

  
  Deflation (economics) - Wikipedia, the free encyclopedia
Deflation is generally regarded negatively, as it is a tax on borrowers and on holders of illiquid assets, which accrues to the benefit of savers and of holders of liquid assets and currency.
Deflation is, however, the natural condition of hard currency economies when the rate of increase in the supply of money is not maintained at a rate commensurate to positive population and general economic growth.
This means that unexpected deflation is a risk to borrowers, since it will mean that the real rate of interest could increase during the term of the loan, just as unexpected inflation is a risk to lenders who may see a reduction in the real rate of interest during the course of the loan.
en.wikipedia.org /wiki/Deflation_(economics)   (4689 words)

  
 Deflation
In economics, deflation is a decrease in the general price level, or a rise in the purchasing power of money with respect to a large class of consumption goods or services, over a period of time.
Deflation is generally regarded as a negative in modern currency environments, because deflationary spiral may cause large falls in GDP and purchasing power, and can often take a very long time to correct.
Deflation is generally regarded negatively, as it is a tax on borrowers and on holders of illiquid assets, which accrues to the benefit of holders of liquid assets and currency.
www.eoft.com /deflation.html   (3737 words)

  
 Christianity and Economics - Debunking Deflation
Deflation is a general decrease in the level of prices in the economy, the mirror opposite of inflation.
Deflation resulting from an unexpected decrease in the money stock will send almost any economy in to a recession, and is rightly considered harmful and to be avoided.
Deflation causes lower interest rates on savings that provide consumers with fewer of those future dollars than they would have had if there were no deflation and the interest rate remained higher.
www.evangelsociety.org /sherk/deflation.html   (6013 words)

  
 Current Writing
Deflation, according to these spokesmen of popular economics, is a decline in the prices of goods and services, the reverse of inflation.
There are countless businessmen who readily embrace fashionable economics because it generally favors government regulation which, in turn, tends to reduce the pressures of competition.
Deflation, in their view, is merely an inevitable phase of a business cycle that is engendered by inflationary policies; it is the final phase, painful but wholesome, as it forces businessmen to readjust to the demands of the market.
www.sennholz.com /deflation.html   (1539 words)

  
 [No title]
The impact of deflation on the household sector debtors With regard to household debtors and creditors, the specification of the consumption function is critical.
However, nominal debt is a critical dimension of the economics of deflation, and this compels a distinction between debtors and creditors.
Deflation increases money demand, which shifts the LM to the left, resulting in a new equilibrium in which the gap between the nominal and real interest rates is equal to the rate of deflation.
www.newschool.edu /cepa/originalsite/papers/workshop/palley_200402.doc   (6736 words)

  
 Tutor2u - Deflation
The type of deflation that analysts fear is the kind that is broadly-based throughout the economy, long-lasting, and symptomatic of a weak economy stuck in recession.
It is clear therefore that deflation in the economy brings risks as well as opportunities.
Deflation is occurring in the markets for some goods in the UK economy.
www.tutor2u.net /economics/content/topics/inflation/deflation.htm   (487 words)

  
 1870s Economics | TPMCafe
Deflation is good for creditors and bad for debtors, while inflation has the reverse impact (all else being equal).
Deflation is the ultimate case of an inverted yield curve; simply holding cash is a profitable investment, while an investment with a modest return may not be profitable at all.
Monetary deflation was a foolish and benighted policy, which added unnecessarily to economic risk and suffering, and added to the extreme inequality of wealth, which was produced during the course of rapid economic development.
www.tpmcafe.com /node/30416   (3774 words)

  
 Economics: Debunking Economics Overview
Debunking Economics takes you behind the sanitized, airbrushed view of economics given by its textbooks, and details the many critiques which have been made of economic theory by economists, in a fashion which is accessible to the intelligent non-economist.
Debunking Economics is listed as one of the UK's Political Studies Association's top seven "recent books which seem to make a significant contribution to the development of political science in general, or are likely to be of wide interest in the field".
Debunking Economics reveals that neoclassical economic doctrines are faulty not because conditions have changed over time, but because the fundamental assumptions from which such doctrines have been derived are less than self-evident.
www.debunking-economics.com   (3674 words)

  
 Deflation and Outsourcing: Somebody Finally Got It Right by Mark Thornton
The major theme of the book is that we have entered an era of deflation and that this is not the horrible phenomenon that it is often portrayed to be.
The main drivers of deflation are global competition, outsourcing, and the emergence of our Wal-Mart style economy, all of which provide the competition that drives down the prices of goods and services and increases our standard of living.
The distinction that Austrians make between monetary deflation (inflation) and price deflation (inflation) is not made in the book explicitly, but it is recognized when he distinguishes between "good" price deflation due to competition and "bad" monetary deflations that result from collapses in the money supply (e.g., the Great Depression).
www.lewrockwell.com /thornton/thornton23.html   (1548 words)

  
 Amazon.ca: Deflation: What Happens When Prices Fall: Books: Chris Farrell   (Site not responding. Last check: 2007-10-10)
The fear of deflation is so great that economists dare not even mention the word; but when Alan Greenspan recently used the phrase "an unwelcome substantial fall in inflation," everyone knew he meant the d word, and it sent shock waves through the economic community.
While deflation is a normal part of the economic cycle most of the 20th century has seen pronounced inflation.
These two long-term economic problems form the major historical basis for the basic premise that monetary policy is the preeminent driver of major economic trends.
www.amazon.ca /Deflation-What-Happens-Prices-Fall/dp/0060576464   (2145 words)

  
 Economist.com | Articles by Subject | Economics focus   (Site not responding. Last check: 2007-10-10)
But the real cause of deflation is insufficient demand—and the cure is macroeconomic stimulus.
The snag is that there is huge uncertainty about the necessary size of such asset purchases and the consequent risk of future losses on the central bank's balance sheet.
As for Mr Fukui's claim that economic textbooks offer no solutions, it shows he is not an economist.
www.econ.yale.edu /~nordhaus/116_2003/Japanese_deflation.htm   (981 words)

  
 EconLog, China, India and Deflation, Arnold Kling: Library of Economics and Liberty
Deflation means that first world investors will be forced to invest in the third world if they want to see real returns on their capital, especially equity.
Remember, economic growth is easy to come by at the initial stages of development, but many, many countries have a hard time sustaining growth over long periods of time (the Asian Tigers are the most recent examples).
The problem with the US being compensated for falling wages by increasing capital earnings is that ownership of capital is not evenly distributed among the general population so the "compensation" may not be paid to those who are the most directly affected by the declining wages.
econlog.econlib.org /archives/2003/05/china_india_and.html   (1693 words)

  
 Article: Deflation and the Bank of Japan   (Site not responding. Last check: 2007-10-10)
Japanese business and government are right to be very concerned about deflation: deflation makes all economic problems worse, particularly the bad debt problem, and interferes with structural reform.
The longer deflation is allowed to go on, the more difficult it is to reverse it, and the harder it is to control.
With deflation, the nominal zero interest rate in Japan is actually a real interest rate of more than 2 percent, which is high for a recession.
www.iie.com /publications/papers/paper.cfm?ResearchID=479   (1796 words)

  
 David Smith's EconomicsUK.com: Bernanke and deflation
Some fear that Bernanke is too much of a dove - he has already said he does not think "core" inflation in America is rising, and cite his willingness to jump on the deflation bandwagon a couple of years ago.
A closer reading of that deflation speech, which in fact was in November 2002, suggests that is a little unfair.
He made clear he was not predicting deflation, merely highlighting the risk.
www.economicsuk.com /blog/000253.html   (316 words)

  
 ECONIS Select: Deflation - theoretische Aspekte sowie empirische Bezüge   (Site not responding. Last check: 2007-10-10)
In: The quarterly journal of Austrian economics : the official journal of the Ludwig von Mises Institute.
In: The North American journal of economics and finance : a journal of theory and policy ; official journal of the North American Economics and Finance Association.
Deflation and monetary policy in a historical perspective : remembering the past or being condemned to repeat it?
www.zbw-kiel.de /dienstleist/econselect/za_deflation.htm   (1409 words)

  
 Fool.com: Deflation Q&A [Motley Fool Take] May 22, 2003
The Federal Reserve, for one, has recently taken a strong stand against deflation, including promises to add as much liquidity to the system as necessary in order to maintain at least modest inflation.
In an article titled "Presupposing Deflation," he provides a broad overview on what deflation is, when it's good, when it's bad, and what the various schools of economic thought have to say about handling deflation.
It is another thing for them to have to cut prices because there is too much product produced by all their competitors yet they have not figured out how to deliver that product (or service) with lower costs.
www.fool.com /News/mft/2003/mft03052206.htm   (671 words)

  
 Amazon.com: Deflation: How to Survive & Thrive in the Coming Wave of Deflation: Books: A Gary Shilling,A. Gary Shilling   (Site not responding. Last check: 2007-10-10)
In Deflation, Shilling outlines why he thinks we're about to enter a prolonged period of deflation and offers advice for businesses and investors on how best to position themselves and their finances and cope with the specter of falling prices.
Lively and easy-to-understand, it tells investors how to recognize telltale signs of deflation, discusses the industry sectors that are positioned to outperform the overall market, and reveals 13 deflation-ready investing strategies­­including low-risk fixed income techniques designed to sustain equity-style total returns.
If you are interested in economic development I would encourage you to read Hernando DeSoto's Mystery of Capital but note his lack of focus on corruption in certain countries.
www.amazon.com /Deflation-Survive-Thrive-Coming-Wave/dp/0071382518   (1999 words)

  
 Business Cycles and Deflation
Deflation is a topic appearing with more frequency in the business press.
Price level forecasts can be found in the NABE Outlook, and pricing forecasts for individual firms can be found in the NABE Industry Survey.
“Deflation and How to Prevent It.” Presentation at the NABE 2003 Policy Conference.
www.nabe.com /publib/deflation.html   (153 words)

  
 EconLog, Deflation-fighting and Depreciation, Arnold Kling: Library of Economics and Liberty
The data make a compelling case that we are on the verge of deflation.
Indeed, the Fed's resolve to fight deflation risks in my view is a key factor that will help with what I call the rebirth of pricing power...
The dollar has declined in value recently, which should help to ease fears of deflation.
econlog.econlib.org /archives/2003/05/deflationfighti.html   (456 words)

  
 Sticky (economics) - Wikipedia, the free encyclopedia
Sticky is a term used in the social sciences and particularly economics used to describe a situation in which a variable is resistant to change.
The result was weak job growth during the recovery: Even when net job growth was positive, it failed to keep pace with the growing labor force.
During an economy wide monetary deflation the downward stickiness of nominal prices such as wages and office leases can cause the destruction of business viability.
en.wikipedia.org /wiki/Sticky_(economics)   (512 words)

  
 Inflation and Deflation - Search Results - MSN Encarta
Inflation and Deflation, in economics, terms used to describe, respectively, a decline or an increase in the value of money, in relation to the...
Economics: Deflation is the easiest thing to avoid; you…, Economics: Even a moderate rate of inflation can hamper…, Economics: Having a little...
Inflation and Deflation : pictures, diagrams and illustrations
encarta.msn.com /Inflation_and_Deflation.html   (95 words)

  
 EconPapers: Understanding Deflation: Treating the Disease, Not the Symptoms
Abstract: Deflation can be defined as a falling general price level utilizing one of the common price indices.the consumer price index; the GDP deflator or other, narrower indices as the wholesale price index; or an index of manufactured goods prices.
In this paper, we argue that deflation can and usually does generate large economic and social costs, but it is more important to understand that deflation itself is a symptom of severe and chronic economic problems.
Econpapers is hosted by the Department of Business, Economics, Statistics and Informatics at Örebro University.
econpapers.repec.org /paper/levwrkpap/392.htm   (274 words)

  
 [No title]   (Site not responding. Last check: 2007-10-10)
However, the upper path has deflation expectations rising rapidly as the nominal wage falls, and in this case the magnitude of effects is reversed and AD falls.
X Policy implications: deflation and the validation of Keynes’ General Theory Keynes’(1936) believed that his General Theory provided a theory of unemployment equilibrium in a capitalist economy.
As a result, it has become clear that generalized price and nominal wage deflation can amplify and deepen the problem of unemployment caused by a shortage of aggregate demand.
archives.econ.utah.edu /archives/pkt/2004m03/doc00001.doc   (1987 words)

  
 EconPapers: Understanding Deflation Treating the Disease, Not the Symptoms
Economics Public Policy Brief Archive from Levy Economics Institute, The
Abstract: Most recent discussions of deflation seem to overlook the main dangers posed by a deflationary economy and appear to offer superficial solutions.
Randall Wray and Dimitri B. Papadimitriou argue in this brief that, barring drastic changes in asset and output prices, deflation itself is not the main problem, but rather the recessionary conditions that sometimes give rise to deflation.
econpapers.repec.org /paper/levlevppb/74.htm   (206 words)

  
 George Selgin's Web Site
Both mention the private copper coinage, but wrongly assume that its success was due to the invention, by Matthew Boulton, of the steam-driven coining press rather than to the competitive nature of the private coinage regime.
My Economic History Review paper, "Steam, Hot Air, and Small Change: Matthew Boulton and the Reform of Britain's Coinage." (Blackwell-Synergy link) refutes this view and explains the real reasons behind the superiority of the private copper coinage.
My main thesis concerning deflation is that it need not be harmful, and can even contribute to overall macroeconomic stability, so long as the rate of deflation mirrors the rate of productivity growth.
www.terry.uga.edu /~selgin   (1942 words)

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