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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Tenchusatsu who wrote (683873)	11/8/2012 4:15:36 PM
From: combjelly	Read Replies (2) \| Respond to of 1572154

So what exactly was the health of the economy, if deflation was the risk? Like it always is in the aftermath of a financial crisis. High debt loads, no credit available. Because of that, consumers stop spending. If consumers don't spend, companies lay off more people. Which makes people even more reluctant to spend. Even when things bottom out, consumers are reluctant to spend. Which means no one will hire. With contracting demand prices for commodities drop as do labor costs. That means prices can drop. If prices drop, that puts pressure on the less efficient businesses and they start to fold. Round and round. This is the dangerous form of deflation because it can lead to a deflationary spiral. The type that results from technological change and process improvements usually results in economic growth. This type does not. A big difference from a normal recession is the lack of credit. When an inefficient business shuts its doors, it leave an opportunity for someone else to try or someone else to expand. To get started or to expand you need credit. If it isn't available, then that gap is harder to fill. This is all standard stuff. Try googling credit deflation.