5 votes
Accepted

Why does falling global bond yields signal coming deflation?

Bond yields falling from their current near-zero position will place them in negative yield territory. Negative bond yields are deflationary by definition. Paragraph 3, sentence 5 of the article says: ...
FreeMarketUnicorn's user avatar
5 votes
Accepted

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

What is the reasoning behind the notion that because bitcoin has no intrinsic value therefore it's not suitable as currency? Or, to put another way, if no one "held" US dollars, but simply used ...
JimmyJames's user avatar
4 votes

Why do falling prices hurt debtors?

If the borrower is a firm, lower prices means your output is selling for less, so you need to sell more units in order to repay the debt (assuming a constant profit margin). For an individual, the ...
Brian Romanchuk's user avatar
3 votes
Accepted

Why not create money to assist the post-COVID-19 economy?

First, the two examples you list here are not equivalent. In the first example some portion of money circulating in economy is destroyed by the computer virus so reverting it would just keep amount of ...
1muflon1's user avatar
  • 56.3k
3 votes
Accepted

Why is deflation not considered the opposite of inflation?

People think that inflation is bad when it gets out of control, say when its more than 3 or 4% a year. The idea is that we all make economic decisions based on prices and its harder to make those ...
Fix.B.'s user avatar
  • 2,658
3 votes

What are the consequences of deflation in Japan?

Here is some evidence from third-party colleagues who have been to Japan in the 90s and recently visited again last year. He informed me that prices were the same as in the 90s or lower. This is ...
Daniel's user avatar
  • 476
2 votes

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

As with inflation, so long as deflation is expected, there is no distortion. The expected deflation is simply built into interest rates. For example, if I expect deflation to be 1% per year and I am ...
Antony Davies's user avatar
2 votes

Inflationary recession vs Deflationary recession

I would like to answer this question by sort of describing what each would start to look like. In an area where the population is aging, the resulting decline in incomes and spending tend to be ...
Daniel's user avatar
  • 476
2 votes

Inflationary recession vs Deflationary recession

Deflationary recession refers to a recession in which prices are falling. An example was the Great Depression. Below you have a graph of the yearly rate of change in CPI. A negative number means a ...
luchonacho's user avatar
  • 8,591
2 votes

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

In general, it is possible to find assets that earn a positive yield. There are still positive-yield low-risk bonds and savings accounts out there, for most currencies. Therefore, rational people ...
410 gone's user avatar
  • 8,158
2 votes
Accepted

Does deflation mean drop in asset prices?

One would need access to stock price index data to make definitive statements. There are probably studies doing such analysis. However, I will make some rather safe generalised comments. Firstly, we ...
Brian Romanchuk's user avatar
2 votes

How low can interest rates go? How deeply negative?

Your question contains several incorrect premises, hence before providing an answer I will first correct those misconceptions as any discussion based on incorrect premises cannot be very productive. ...
1muflon1's user avatar
  • 56.3k
1 vote

Does people paying back their debts cause deflation?

so in theory reducing the monetary supply and causing deflation. This statement is too simplistic, as it assumes there is a direct link between the money supply and the price level. Whatever ...
Brian Romanchuk's user avatar
1 vote

Does people paying back their debts cause deflation?

It is true that paying back loans causes contraction of money supply (if not offset by faster creation of new loans). However, it is not correct to say that this generally happen when debt is forgiven ...
1muflon1's user avatar
  • 56.3k
1 vote

Does the tech sector show that we can live with deflation?

Is it possible for a society to live with deflationary prices and suffer no ill effects? No, if you count above average unemployment, deeper recession and potentially more sluggish growth as “ill ...
1muflon1's user avatar
  • 56.3k
1 vote

What's wrong with a deflationary economy?

3 problems with deflation, other than what you already pointed out which is that "consumers/businesses would decrease spending in anticipation of lower prices". Decreased spending in ...
H2ONaCl's user avatar
  • 943
1 vote

What's wrong with a deflationary economy?

This is not a matter that can be answered just by intellectual arguments around what behavioral motives and tendencies does inflation and deflation create in an economic agent and by extension at the ...
Alecos Papadopoulos's user avatar
1 vote
Accepted

Why was there a deflation in UK around 2015?

Deflation was in UK in April 2015 and September 2015. Both of the times it was just 0.1% which is not really considerable. Following the Bank of England (UK central bank that also does research on ...
1muflon1's user avatar
  • 56.3k
1 vote

Why is there inflation?

I wonder: Why is inflation or deflation "necessary"? Theoretically speaking its not necessary. Theoretically central bank could just follow monetary policy rule that would keep inflation 0 ...
1muflon1's user avatar
  • 56.3k
1 vote

Classical Theory of Inflation - Money Supply, Money Demand and Prices

If the demand curve SHIFTS to the right (due to a thriving economy and an increase in transactional demand for money) and the central bank keeps the money supply the same, the result would be ...
1muflon1's user avatar
  • 56.3k
1 vote

Why is deflation bad for economy?

First of all it is important to make clear what economists are actually saying. Most economists believe that moderate inflation is better than moderate deflation, while high inflation or deflation ...
1muflon1's user avatar
  • 56.3k
1 vote

Why do falling prices hurt debtors?

In economics, the "cost" of A is ultimately the value of what you could have had if you hadn't gotten A. If you take out a loan of \$1000 in 2018 and owe \$1100 in 2019, then the cost of the loan is ...
Acccumulation's user avatar
1 vote

Currencies fixed to gold

When it is said that currencies are 'fixed' against each other, they are maintained fixed. The exchange rate will still keep fluctuating, as there is obviously still a supply of and demand for the ...
hrrrrrr5602's user avatar
1 vote

Why do central banks print money?

If a central bank stopped printing money then deflation would eventually occur meaning the value of $1 would increase over time. There is a simple intuition as to why this would happen. Imagine ...
TheSaint321's user avatar
1 vote

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

The whole point of the recent attempts at monetary expansion ("printing money") has been to prevent deflation. There's nothing secret about it, and it doesn't "steal from the economy".
410 gone's user avatar
  • 8,158
1 vote

Inflation vs Deflation

I wouldn't necessarily agree that inflation is universally preferable to deflation. Each has positive and negative consequences. Inflation hurts savers, deflation hurts current consumers. A little ...
Yevgeniy Feyman's user avatar
1 vote

Why not just print money to combat deflation?

That's essentially what Quantitative Easing was supposed to be. However, we've known for about 80 years that it doesn't work in times like these, and like the 1930s, when demand is flat because of a ...
410 gone's user avatar
  • 8,158
1 vote

Why do indebted governments fear deflation?

Deflation is when the purchasing power of money goes up because of either a reduction in available currency or an increase in productivity. A sympton of deflation is a persistent decrease in the cost ...
Hyden's user avatar
  • 11

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