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Non-Tech
Deflation
An SI Board Since January 2000
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Emcee:  Don Green Type:  Moderated
The topic of deflation is starting to be mentioned on a number of threads. I think the time has come for an SI thread dedicated to the exploration and discussion of the concept and its potential ramifications for investors.


web.mit.edu

"CAN DEFLATION BE PREVENTED?

This week's cover story in The Economist makes it more or less official. Deflation, not inflation, is now the greatest concern for the world economy. Over the past year, producer prices have fallen throughout the advanced world; consumer prices have been falling for the last 6 months in France and Germany; in Japan wages have actually fallen 4 percent over the past year. Until the recent crisis prices were falling in Brazil; they continue to fall in China and Hong Kong; they will probably soon be falling in a number of other developing countries.

So far, none of these price declines looks anything like the massive deflation that accompanied the Great Depression. But the appearance of deflation as a widespread problem is disturbing, not only because of its immediate economic implications, but because until recently most economists - myself included - regarded sustained deflation as a fundamentally implausible prospect, something that should not be a concern.

The point is that deflation should - or so we thought - be easy to prevent: just print more money. And printing money is normally a pleasant experience for governments. In fact, the idea that governments have a hard time keeping their hands off the printing press has long been a staple of political economy; dozens of theoretical papers have argued that the temptation to engage in excessive money creation causes an inherent inflationary bias in fiat-money economies. It is largely to combat that presumed bias that most of the world has accepted the notion that monetary policy should be conducted by an independent central bank, insulated from political influence - and has written into the charters of those central banks that they should seek price stability as their main, often only, goal.

Yet here we are, with deflation turning out to be a serious problem after all - and with policymakers finding that it is not as easy either to prevent or to reverse as we all thought.

How can this be happening? What does it imply for policy? The purpose of this note is to argue that more or less conventional economic theory actually does suggest some answers to these questions - but that these answers fly in the face of conventional policy wisdom. And because the answers are so hard to accept, deflation is indeed a real risk..."
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ReplyMessage PreviewFromRecsPosted
6214/9/25 FT -- The trades threatening the Treasury market: archive.isJon Koplik-April 28
620Deflation No Cure for Affordability Crisis, Bank of Canada Says [graphic] (BloDon Green-11/26/2024
619When will China deflation have a higher weight in policy calculation? InvestingDon Green-9/14/2024
618Japan-style deflation rears ugly head amid Chinese price war The Standard An aggDon Green-6/16/2024
617MarketWatch / how stupid the Fed / bond mkt is .................................Jon Koplik12/14/2024
616latest Hoisington Econ. Review available now : hoisington.comJon Koplik11/19/2024
615Is the Federal Reserve prepared for the coming deflationary shock from China? DDon Green11/18/2024
614Financial historian Paul Schmelzing / borrowing costs / database back to 1311 Jon Koplik-10/9/2023
613good "talk" about : GDP vs. GDI -- From : WSJ ........................Jon Koplik19/7/2023
612Excellent !Jon Koplik-9/1/2023
611Examining the Causes and Consequences of Inflation and Deflation August 30, 20Don Green-8/31/2023
610Short summary = people who argue deflation is terrible and inflation is good areMaurice Winn28/31/2023
609Hey, this deflation stream has started flowing as a trickle for a couple of yearMaurice Winn-8/31/2023
608Reuters -- New York Fed data shows underlying inflation may be slower than thougJon Koplik17/9/2023
607AI and the Ultimate Deflation [graphic] Photo by Danilo Batista on UnsplashADon Green-4/26/2023
606Behind the worries of deflation: the essence is the lack of line- FT??? [graphiDon Green-4/17/2023
605Immaculate Disinflation: A Long Way to Lower Inflation By Mark Hackett and Ben Don Green-2/26/2023
604WSJ Opinion -- High Inflation Will End Soon ....................................Jon Koplik-2/15/2023
603What Is Deflation? Definition, Examples, Causes & SolutionsThe counterpoint Don Green-1/11/2023
602WSJ Opinion / Alan Blinder / What if Inflation Suddenly Dropped and No One NoticJon Koplik11/5/2023
601 Why the Threat of Deflation is Real“The Federal Reserve is forging ahead witDon Green-12/30/2022
600Elon Musk Sees Deflation Coming If There Is Another Major Fed Rate Hike 9-12-22Don Green-9/12/2022
599WSJ piece / demographics maybe doing reverse of what people usually think ......Jon Koplik-3/10/2022
598Prepare for deflation Rick Ackerman2/28/2022 I spent the evening with a woman wDon Green-3/1/2022
597Record Debt, but Slowing Momentum Points to Deflation Murray Gunn on February 11Don Green-2/13/2022
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