Saturday, August 29, 2009
An American Deflation
In economics, deflation is a decrease in the general price level of goods and services.[1] Deflation occurs when the inflation rate falls below zero percent, resulting in an increase in the real value of money – a negative inflation rate. This should not be confused with disinflation, a slow-down in the inflation rate (i.e. when the inflation decreases, but still remains positive).[2]Inflation reduces the real value of money over time, conversely, deflation increases the real value of money. Money refers to the functional currency (mostly unstable monetary unit of account) in a national or regional economy.
Currently, mainstream economists generally believe that deflation is a problem in a modern economy because of the danger of a deflationary spiral.[3] Deflation is also linked withrecessions and with the Great Depression. Additionally, deflation also prevents monetary policy from stabilizing the economy because of a mechanism called the liquidity trap. However, historically not all episodes of deflation correspond with periods of poor economic growth,[4] while there are many examples of how strong rise in CPI immediately precedes or accompanies an economic downturn, such as Great Depression, the 1970-80's, and the 2008 economic crash.
Folks anyone who went to college and was forced to take economics should know... An idiot for a president, a fed chairman with a gun to his head to keep rates at all time unjustified lows. The basic tenet of human greed, fueled by an pointless and miss managed war in a foreign country. Spells disaster.
ReplyDeleteThe Japanese took almost 10 years to get out of a similar deflationary mess. Only they don't even have a standing army to support. OUR LEADERS AT NEA AND CTA MAY NOT BE THE BRAIN TRUST BUT THEt HIRE PEOPLE WHO CAN help them with reading the newspaper. Everyone, including Bush knew this was coming. They just wouldn't tell you.