Thursday, Jan 15, 2009
Some easy reading
InflationData.com: What is Deflation
In common usage deflation is generally considered to be "falling prices". But there is much more to it than that. Often people confuse deflation with disinflation or with Depression (as in "the Great Depression"). These three terms are related but not synonymous.
According to Investorwords.com the definition of Deflation is "a decline in general price levels, often caused by a reduction in the supply of money or credit. Deflation can also be brought about by direct contractions in spending, either in the form of a reduction in government spending, personal spending or investment spending. Deflation has often had the side effect of increasing unemployment in an economy, since the process often leads to a lower level of demand in the economy. The opposite of inflation."
10 Comments
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1. plato said...
I'm still not clear on exactly which state we are in although I lean toward deflation. Would like some comments from you clever bloggers in economic matters as we seem to have the causes of Inflation and Deflation happening at the same time.
2. troy said...
inthegeneralrunofthingsonehastolookatallthepossibilities
and then look at history
1st world, 2nd world, 3rd world
plato ~~~ you know the answer ~~~~ but you require the vox pop
they are all asleep
the casino must win ~~~ otherwise ~~~why have a casino?
nemo knew this
ursury is an old tool and Venice, Amsterdam and London passed the infection on to wherever the glue would stick
be it in the med or in the head
atlantic or pedantic, pacific or specific ~~~~ there it lies til woken by your cries ~~~ woe, what becomes?
3. p. doff said...
Is it my imagination, or is something strangely schizophrenic happening to this blog? Same style, same sentiment, same angle....but different names.
Spooky!
4. flintster1994 said...
Been thinking the same thing p,doff. Started off so gently gently, but I guess it becomes harder to hold back by the day.
5. p. doff said...
4. flintster1994 said...''Started off so gently gently''
The most amusing part is the fake outrage when they are rumbled. LOL
6. phdinbubbles said...
23rd December: Malct wishes crunchy a Merry Xmas
24th December: Troy makes his first post
Anyone would think it's a conspiracy!
7. Saywhat!! said...
Ahh... deflation.. well we've got that now, house prices crashing.. job losses so less money in the economy hence prices have to come down... soon those with a job will either have to take salary cuts or when they start printing money and start hyper inflation it will be the same story your cash buys you less... Looks like the UK soon have to change its name to Bust-ish or Brit-babwe.... The best advice I can give is leave asap... if you stay you better learn outdoor survival skills like sleeping rough... Bring on the house price crash... bring on the deflation...
8. greytornado said...
Inflation is understood by most people to mean an expansion of the money supply. The Central Bank keeps on increasing the money supply by printing more. This means that the money gets worth less and prices go up. Deflation therefore must be the reverse, ie the money supply reduces. Just because all the shops were selling goods cheap over Xmas doesn't mean that the prices are coming down though, it just means that businesses are trying to generate cash flow. My mind works on the principles of simple explanations; no doubt someone with a better brain than mine will post a better explanation. Don't get fooled by the deflation though - a tsunami of inflation is, I suspect just around the corner.
9. rickyb said...
I'm no economist, but surely when talking about inflation, you need to qualify the term by referring to money supply inflation, and price inflation as measured by CPI and RPI. Money supply inflation does not necessarily lead to price inflation if the increase in money supply is used for infrastructure or capital growth.
The thing that may push us into a price deflationary phase is the reduced cost of energy, since increased use of energy with no corresponding GDP growth is always deflationary.
10. Adarmo said...
Money supply inflation is called an expansion FYI and it can influence price inflation, also of interest is teh velocity of money, the rate at which each pound does the rounds so to speak.