Difference between revisions of "Deflation"
(Annual interest rates on savings can become negative rather than the usual positive, as depositors may have to pay banks to safeguard the money.) |
(→Forces of deflation: extreme price-cutting by sellers, which can be encouraged by technological factors such as the internet or be due to intense competition such as price wars between Wal-Mart and Amazon, or between Apple and [[G) |
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Forces that push an economy towards deflation include the following: | Forces that push an economy towards deflation include the following: | ||
| − | *low overall employment | + | *high [[unemployment]], or low overall employment that can occur even if reported [[unemployment]] is small. This is prevailing in 2017. |
| − | *extreme price-cutting by sellers, which can be encouraged by technological factors such as the [[internet]]. | + | *extreme price-cutting by sellers, which can be encouraged by technological factors such as the [[internet]] or be due to intense competition such as [[price war]]s between [[Wal-Mart]] and [[Amazon]], or between [[Apple]] and [[Google]] (now owned by Alphabet). |
| − | *[[invention]]s, as occurred shortly after the [[Civil War]]. | + | *[[invention]]s that sharply increase productivity, as occurred shortly after the [[Civil War]]. |
== References == | == References == | ||
Revision as of 04:37, May 20, 2017
Deflation is when the value of paper money (e.g., a dollar bill) increases over time. The cost of goods "deflate" in their prices, so that what cost $1 last year may cost only 80 cents this year. Annual interest rates on savings can become negative rather than the usual positive, as depositors may have to pay banks to safeguard the money.
Deflation is the opposite of inflation, but liberals consider deflation to be worse. The Great Depression, for example, was characterized by deflation.
But some disagree with the liberal view of this. As one observer points out, "[t]he period of the greatest growth in the U.S. during the nineteenth century, from 1820 to 1850 and from 1865 to 1900, was associated with significant deflation."[1]
Forces of deflation
Forces that push an economy towards deflation include the following:
- high unemployment, or low overall employment that can occur even if reported unemployment is small. This is prevailing in 2017.
- extreme price-cutting by sellers, which can be encouraged by technological factors such as the internet or be due to intense competition such as price wars between Wal-Mart and Amazon, or between Apple and Google (now owned by Alphabet).
- inventions that sharply increase productivity, as occurred shortly after the Civil War.
References
