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Non-Tech : Deflation -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (155)	11/13/2002 12:08:30 AM
From: Maurice Winn	Read Replies (1) \| Respond to of 621

Huh? That's news to me. So inflation could be running at 40% and we could be simultaneously experiencing deflation. I've never heard of that one. Prices rising fast is still inflation. I think you might be pulling my leg. So how come economists worry about deflation. "Oh, how terrible. We've got deflation and the inflation rate has dropped from 80% per year down to 70% per year". I've never heard that. Inflation is considered bad and attempts are always made to reduce it a low rate. I've never heard moaning about reductions in inflation. Mqurice

To: ahhaha who wrote (155)	11/19/2002 1:43:11 AM
From: JF Quinnelly	Read Replies (1) \| Respond to of 621

When economists talk about deflation they mean a slowing in the rate of inflation. They never mean a decline in the general price level. That isn't possible and the ability to preclude it creates all the problems. "Disinflation" is a slowing of the rate of inflation. "Deflation" is indeed a decline in the general price level, such as what the United States experienced during the 1930s. A significant factor was a 30% drop in the money supply as banks collapsed. Money became extremely scarce, and prices fell accordingly. It's a rare downward spiral possible with fractional reserve banking, when credit money vanishes and only the monetary base remains. You can read all about it in Friedman and Schwarz's A Monetary History of the United States