Deflation

Deflation Good, bad and benign inflation Deflation problems Deflation and the 1930s Japanese deflation myth

Good, bad and benign deflation

Bad deflation is caused by decreased related to a financial crisis. Lower demand due to demographic changes it is benign deflation. Good deflation is caused by reductions in the cost of goods.

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Deflation problems

There are five main arguments against deflation: it is bad for the economy, debtors, and companies, stops people spending, and makes it difficult for central banks to control the economy.

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Deflation and the 1930s

History often portrays the problem of the 1930s as deflation. However deflation was just one of the outcomes of the financial crisis at that time and not the cause of it.

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The Japanese deflation myth

Japan has not actually experienced much deflation in its "lost decades". An alternative explanation for the lower prices seen in Japan is related to the strengthening Yen.

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