Falling Prices Are Not Deflation

[LargoWinch]

Hope this helps which regards to the "inflation vs deflation" debate.

Note that you can download legally* a full pdf version of the author's book here: Capitalism:ATreatise on Economics (*see also the bottom of the article).

-W.


[Contrary to The Times and so many others, deflation is not falling prices but a decrease in the quantity of money and/or volume of spending in the economic system. To say the same thing in different words, deflation is a general fall in demand. Falling prices are a consequence of deflation, not the phenomenon itself.

Totally apart from deflation, falling prices are also a consequence of increases in the production and supply of goods, which are an essential feature of economic progress and a rising standard of living. In such circumstances, falling prices are not accompanied by any plunge in business sales revenues or profits, by any increase in the difficulty of repaying debt, or by any surge in bankruptcies. All of these phenomena are the result purely and simply of deflation, not falling prices.]

See article link:
http://georgereisman.com/blog/2009/0...-to.html#links

[FRED]

Re: Falling Prices Are Not Deflation

If deflation is low demand then inflation is high demand.

Using this logic, demand is approaching infinity in Zimbabwe.

[phirang]

Re: Falling Prices Are Not Deflation

Can't have inflation w/o an increase in wages.

Well... you CAN, but then you get Hitler.

[*T*]

Re: Falling Prices Are Not Deflation

Can't have inflation w/o an increase in wages.

Well... you CAN, but then you get Hitler.

Haven't we just had a period of inflation without increasing real wages?

[FRED]

Re: Falling Prices Are Not Deflation

Can't have inflation w/o an increase in wages.

Well... you CAN, but then you get Hitler.

A common misconception. From FIRE Economy D-Day:

The sequence of Germany's pre-WWII economic crisis is commonly misremembered as follows:

1. Hyperinflation
2. Depression
3. Hitler elected by angry masses
4. WWII

Not so. Here's what really happened.

1.

1921 to 1923: German hyperinflation

1924: Dawes Plan to restructure debt, Rentenmark replaces the Papiermark

1924: Rentenmark backed by land and industrial goods, hyperinflation ends

1924 to 1929: US and British financing pours into Germany, economy recovers

1925: Germany joins the League of Nations

1929: US market crash (FIRE Economy V1.0), US and British investment in Germany ends

1930: German economy collapses

Then:

2. Deflationary depression (like the U.S., Germany stayed on the gold standard)
3. Hitler
4. War

[don]

Re: Falling Prices Are Not Deflation

A common misconception. From FIRE Economy D-Day:

The sequence of Germany's pre-WWII economic crisis is commonly misremembered as follows:

1. Hyperinflation
2. Depression
3. Hitler elected by angry masses
4. WWII

Not so. Here's what really happened.

1.

1921 to 1923: German hyperinflation

1924: Dawes Plan to restructure debt, Rentenmark replaces the Papiermark

1924: Rentenmark backed by land and industrial goods, hyperinflation ends

1924 to 1929: US and British financing pours into Germany, economy recovers

1925: Germany joins the League of Nations

1929: US market crash (FIRE Economy V1.0), US and British investment in Germany ends

1930: German economy collapses

Then:

2. Deflationary depression (like the U.S., Germany stayed on the gold standard)
3. Hitler
4. War

I enjoyed seeing that put right the first time around. Hitler did not pop out of a wheelbarrow of Marks. The Nazi Party did get its start during German hyperinflation but with Wiemar's recovery the Party's support plummeted. It took a global fall to resuscitate it.

[Rajiv]

Re: Falling Prices Are Not Deflation

See also the video - 21 Evils of Inflation - Prof. Krassimir Petrov