Deflation is defined as a general decline in prices, with emphasis on the word 'general.'
Sentiment: NEGATIVE
Sector-specific price declines, uncomfortable as they may be for producers in that sector, are generally not a problem for the economy as a whole and do not constitute deflation.
In the simplest terms, inflation occurs when there's too much money in the system. On the flip side, deflation occurs when there are too few dollars in circulation.
Deflation isn't good, and inflation is easier to cure than deflation.
Deflation can be particularly dangerous when a financial system is shaky, with household and corporate balance sheets in poor shape and banks undercapitalized and heavily burdened with bad loans.
Inflation is not always the main problem, or indeed a problem at all. Sometimes, though rarely, deflation is a more serious threat, and we need to shelve many of the orthodoxies we have held so dear.
To face deflation, you have to have people accepting it and not reacting to it.
The real problem is deflation. That is the opposite of inflation but equally serious to the borrower.
Declining productivity and quality means your unit production costs stay high but you don't have as much to sell. Your workers don't want to be paid less, so to maintain profits, you increase your prices. That's inflation.
However, in spite of the general perception that monetary policy should be conducted so as to avert deflation, a central bank cannot lower interest rates below the zero lower bound.
If machines do everything well, including allocating capital and resources efficiently, can that be deflationary, can that eliminate poverty? I don't know. It's hard to be very optimistic if you look at how humans have behaved historically.
No opposing quotes found.