Deflation

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In economics, deflation is a decrease in the general price level of goods and services.[1] Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). This should not be confused with disinflation, a slow-down in the inflation rate (i.e., when inflation declines to lower levels).

Quotes[edit]

  • Ziyauddin's sarcasm is incisive. Occasionally his sardonic humour helps him to sum up his ideas in a few words. His remark that in Alauddin's days "a camel could be had for a dang," but wherefrom the dang?" - shows at once how the reforms of Alauddin had made articles cheap and people poor.
    • Ziyauddin Barani quoted in K.S. Lal, Studies in Medieval Indian History, 1966
  • To every outworn shibboleth of 19th-century economics he clung with fanatic tenacity. Economy, Free Trade, Gold - these were the keynotes of his political philosophy, and deflation the path he trod with almost ghoulish enthusiasm.
  • The big, looming, monetary issue is "quantitative easing": that is, printing money. What happens is that the government borrows from the Bank of England, not from the markets. It expands the money supply to keep the economy going and also to counter deflation without simultaneously increasing government debt. The attractions are obvious, as are the dangers. The Robert Mugabe school of economics provides a salutary warning about uncontrolled monetary expansion in generating hyper-inflation. The road to Harare is not as long as we might hope. Monetary easing may prove to be necessary but will have to be managed with great skill and care: Too little easing and the crisis drags on – as in Japan. If there is too much, the authorities face the messy task of mopping-up liquidity by issuing bonds which add to the burden of borrowing or else we lurch back from deflation to inflation. So interest rates may soon become yesterday's story.
  • See your disappointments as good fortune. One plan's deflation is another's inflation.
  • The clear and present danger is, instead, that Europe will turn Japanese: that it will slip inexorably into deflation, that by the time the central bankers finally decide to loosen up it will be too late.
  • The declared object of deflation was the restoration of the gold standard at pre-war parity. Its actual effect has been to create unemployment by the restriction of industrial credit. By the lever of unemployment it has forced down wages and has thus facilitated the return to gold through the reduction of prices. An incidental effect has been to transfer purchasing power from the workers, whose wages have been reduced, to the bondholders, whose interest has remained the same. It has also doubled the real burden of Debt since 1920, and was largely responsible for the mining lock-out last year, by the reduction in terms of sterling of the money which we receive for coal sold abroad. Deflation, in fact, has been responsible for a sinister catalogue of disasters which can be substantiated in detailed argument that has never yet been rebutted.
    • Oswald Mosley New Leader (20 September 1927), quoted in Robert Skidelsky, Oswald Mosley (Papermacs, 1981), pp. 152-153.

External links[edit]

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