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Questions tagged [deflation]

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Are corporate savings deflationary?

Example: Apple. People "overpay" for their products, money that ends up in corporate savings and not in their competitors' coffers, sort of a black hole because Apple doesn't see enough investment ...
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4answers
548 views

Why do falling prices hurt debtors?

The argument goes that if there is deflation, the real interest rate rises, and so the burden on debtors increase (Paul Krugman says so in https://krugman.blogs.nytimes.com/2010/08/02/why-is-deflation-...
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1answer
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Effect of a Deflationary Cryptocurrency

Wikipedia lists Deflation as a bad thing, but I'm assuming that the article makes the assumption that the currency is a fiat currency (as opposed to cryptocurrency). I understand the general principle ...
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1answer
54 views

Currencies fixed to gold

Based on the quoted section & example below: Why would the Franc or USD fall in price vs the other if they are both fixed to gold; why would having less gold cause paper money to contract? Why ...
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1answer
134 views

Why do central banks print money? [duplicate]

If a country's central bank prints money, it causes inflation. However, apparently, small amounts of inflation is a good thing. Why is the case? What would happen if central banks stopped printing ...
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0answers
75 views

Can real wages increase (practically) without inflation?

It has been suggested that a strong economy will raise wages for all. However, I suspect that this can occur in only a few ways. First, assume that the wealth distribution in the U.S. is such that a ...
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1answer
23 views

Is it possbile central banks are outside of books getting money from deflation? [duplicate]

Is it possile that central banks are secretly stealing from the economy by printing money when the the dollar deflates, so the dollar stay the same value and nobody notice it? What if the dollar ...
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1answer
35 views

Central Banks Currency being used as value keeping hypothesis

I recently came up with the idea that all the worlds currencies with central banks may be being used as a way to steal value from people who give value to them. And no, im not talking about inflation (...
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3answers
2k views

Inflationary recession vs Deflationary recession

I heard the terms deflationary recession & inflationary recession in a podcast and would like to understand what it means, what causes them and past examples.
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1answer
2k views

Converting current to constant USD values for trade data (UN Comtrade)

I am using WB (country GDP) data in combination with UN Comtrade (bilateral trade) data. I need to divide bilateral trade by GDP so as to find out which % of a country's GDP comes from bilateral trade....
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1answer
254 views

Deflation and positive real interest rate [duplicate]

Economists say that deflation leads people to postpone their consumption because it increases the value of their money and gives them the ability to consume more in the future. But if a consumer saves ...
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1answer
145 views

Inflation vs Deflation [duplicate]

Why is in flation preferable to deflation? I appreciate this is largely due to the fact that deflation causes a large decrease in demand as people continually wait for prices to decrease, but if ...
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1answer
564 views

Why not just print money to combat deflation?

If interest rates are zero and inflation is under 2% per year then why not have the fed print money without borrowing until inflation is back at 2% per year? The money could be used to pay off the ...
4
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2answers
319 views

because bitcoins do not generate earnings, then (it is a ponzi scheme)?

What does the author mean with: Since Bitcoins do not generate any actual earnings, they must appreciate in value to ensure that people are willing to hold them. Why must they appreciate in ...
4
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1answer
182 views

Why does falling global bond yields signal coming deflation

In this article, it suggests that, "Bond markets are signalling something very nasty coming down the road at us – an all encompassing, worldwide deflation. " I cannot understand why bond yields ...
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1answer
337 views

Why is deflation not considered the opposite of inflation?

In this article from 2013 on bitcoin, the author casually states the importance of knowing that "deflation is not the opposite of inflation", without expanding or elaborating. I'm sure that there are ...
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1answer
38 views

Estimating the cost of an assett that needs to be replenished [closed]

I am working with hard drives. For simplicity, let's say all drives have the same capacity, 1TB and all cost $100. They typically last about 4 years, when they need to be replaced. They drop in ...
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2answers
605 views

What are the consequences of deflation in Japan?

Most of literature I can find about deflation in Japan takes for granted deflation is bad for the country. I can also find much literature on why deflation is bad on theory. Is there any analysis of ...
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2answers
3k views

Why does deflation cause banks to increase their interest rates?

I have read that in a deflationary spiral, lower prices cause banks to increase their interest rates. Is this true and what is the logic behind it?
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2answers
92 views

Is it possible for a Central Bank to escape from a deflation trap by 'hiding' information?

I'm reading this book on macroeconomics. When determining the nominal interest rate, the Central Bank has in mind its real interest rate goal. By the Fisher Equation: $i_t=r_t+\pi^{E_{CB}}_{t+1}$, ...
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2answers
98 views

Do rising inequalities create inflation?

When the "richs"* get richers, the "poors"* get poorer... assuming: h1) a constant volume of money, h2) a constant volume of people, h3) a close separation between the two groups of people, h4) a ...
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7answers
1k views

Why didn't the money printing by the US Federal Reserve since 2008 lead to inflation?

http://www.telegraph.co.uk/finance/comment/liamhalligan/8484530/Americas-reckless-money-printing-could-put-the-world-back-into-crisis.html America's reckless money-printing could put the world back ...
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2answers
110 views

What's the actual relationship between deflation, spending and saving?

I am pretty confused with this concept. Since deflation is a result of decreasing prices, it means that the demand for goods and services rise therefore stimulating more spending. But on the other ...
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1answer
60 views

In Austrian theory, does constant, predicted deflation distort credit markets?

Many leading Austrian thinkers propose a 100% reserve gold standard banking. They agree that such a system leads inevitably to monetary deflation if productivity continually improves. Austrians also ...
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1answer
480 views

Could debt cause inflation instead of deflation?

It is well known that debt can cause deflation, especially during crisis: to repay their debts agents sell their goods which causes a fall in prices. But if there is no crisis and agents "have the ...
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1answer
46 views

Real and nominal value interpretation

When price is deflated according to some base year, what does the real value mean? E.g. if we are deflating \$5.000 from year 2000 (base year, deflator=1) to 1980, using the CPI 1.6 from 1980, we get \...
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1answer
401 views

Does it make sense to 'deflate' a sectoral price index in a regression analysis?

For instance, if one is running a regression with deflated prices for a given year and one of the independent variables is a price index for a given sector, does it make any sense to 'deflate' this ...
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2answers
235 views

Easy to understand explanation of deflation and what causes it

This pretty much went over my head:http://en.wikipedia.org/wiki/Deflation Is there something a bit easier to digest than this? For a non econ student?
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1answer
468 views

How can the Swiss exchange rate be very biased in a free market?

In 2002, when Germany, France, Italy and Austria adopted the Euro currency, the exchange rate with Switzerland was 1.60 CHF (Swiss Franc) = 1€ (Euro). The prices and salaries in Switzerland were ...
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3answers
866 views

What benefits does Bitcoin (i.e. cryptocurrency) offer?

I really, really like moderate inflation. I live in Sweden where the interest rates just went negative because we are on the brink of deflation, and the rate of inflation we have now is far too low. ...
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2answers
2k views

Real value of debt

The Wikipedia article for real value says In economics, a nominal value is an economic value expressed in historical nominal monetary terms. By contrast, a real value is a value that has been ...
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5answers
398 views

Why isn't there an “ideal value” for a given currency? [closed]

If a currency can be worth too little (e.g. needing \$10,000,000,000 to buy a loaf of bread) and worth too much (e.g. being able to buy a loaf of bread for $0.00001), why isn't there an "ideal value" (...