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I'm removing
It's not certain at all -- it's a reversal of cause and effect. Also counterfactual comments about people delaying purchases (Keynesian nonsense about consumption driving the economy, as well. Investment is what's important, duh!)
I'm removing this, too:
Again, it's nonsense: in deflationary times, people need less money, so they're not going to increase their cash holdings.
This next is just bad wording:
What is this "rigidity"? If it exists, it's caused by government policy, not the "economy".
I changed "positive effect" to "negative effect" -- the intention of the stated policies is to prevent deflation, i.e., to negate it, not to increase it. The use of the word "positive" was clearly intended to imply that deflation is a bad thing, not that the effect is to drive it, but that's NPOV if anything is.
I removed
for two reasons: (1) it isn't obvious at all, and (2) it's blatantly untrue -- a "deflationary spiral" can only occur until the supply of credit money has been sopped up: the supply of "real" money is a limiting factor. Unlike an inflationary spiral, which can go on effectively without limit.
The answer is known. Some people just don't like it -- they're the ones with the non-neutral POV.
There's still a lot wrong with the article (e.g., the price of cars falling is not deflation! Deflation proper is a fall in the money supply, but price deflation means a general fall in prices, not just the price of cars falling! During deflation, the production costs of the cars will be falling as well, so the factory can still make a profit) 218.101.88.104 05:53, 5 May 2004 (UTC)
As a practicing economist who lived through 68 straight months of falling (year-on-year) consumer prices, I can tell you that large amounts of deflation are as destructive of economic health as large amounts of inflation. People do delay making purchases (the bigger the ticket, the longer the delay) because they know that it will be cheaper, later. My real world experience is in Hong Kong. DOR (HK) ( talk) 05:52, 4 June 2008 (UTC)
These are all problematic. A lot of these are "good economic things to do" but most of them don't have anything to do with deflation.
Other government policy changes that can reduce deflation include:
I agree-- Confuzion 03:23, 14 May 2004 (UTC)
I think this article has grown a bit upwieldy, esp. the tools to fight deflation - the government policy stuff could go on forever if you really wanted to; but I don't really know how effective they are, relatively - also, they may be easily summarized as 1. stimulate economic growth 2. increase consumer confidence 3. legislation to improve capital/labor allocation
Also, is the following statement accurate? I thought that, for the most part, the US economy was mainly, if not completely, still in a mild inflationary state during 2001 to 2004... does anyone actually have facts to back up the statement below about US deflation from 2001 to 2004?-- Confuzion 03:22, 14 May 2004 (UTC)
Minor deflations: Throughout the nations' history, inflation has approached zero and dipped below for a short time (negative inflation is deflation). This was very common in the late 1800's, and even more recently in 2001 through 2004.
Rubbish! The US (and pretty much the whole world) has been inflating massively for years. What are you using to determine recent deflation? The CPI? That's a useless measure, well known to undercount inflation.
This statement is inaccurate: "decrease in the money supply (the M3). If there is less money, each unit of currency becomes more valuable, and this is deflation. When an economy contracts, production is too high and must fall to meet (decreased) demand. However, the capacity to produce often remains the same for a while."
A decrease in the money supply does technically make each unit of currency more valuable but it also must be noted that wages go down at an amount that is equal to the money supply contraction. For instance, if the money supply is cut in half, prices are cut in half but so are wages. Therefore, each unit of currency technically becomes more valuable, but a consumer's spending power will not be increased. I'm changing this statement. -- Dissipate 22:17, 23 Jun 2004 (UTC)
This article needs a complete overhaul. It is very confusing because it does not distinguish between the different types of deflation. If deflation is defined to be a cause (general decrease in prices), all the main causes must be clearly stated. I'm working on an overhaul, it should be done in a few days. -- Dissipate 03:48, 24 Jun 2004 (UTC)
I took this out of the article:
Seriously, this contradicts the paragraph immediately prior to it, and it is hardly a solid economic argument. What this is saying is that bankers dislike an opportunity to charge people higher real interest rates. - Nat Kraus e 05:37, 14 Jun 2005 (UTC)
"Bills and coins now account for less than 5% of the money supply. The printing press is therefore nowadays an ineffective mean. Bernanke, a board member of the US central bank, has made the case that the US central bank (Fed) was ready to drop money from helicopters, finance on a large scale the federal deficits. However this policy has never been implemented so far on a large scale, probably because it is blatantly inflationist and because it hurts all those who profit from the lending business."
Is this not POV? It's confusing in any event. Can someone who knows more than me make an attempt to clean this up? Aplomado 01:49, 1 March 2006 (UTC)
I don't think it is POV. THis is basic facts. I could have written, the printing press and market operations are now ineffective means to boost money supply, I could have written, the central banks are now minor players in the money creation scheme, as soon as the credit bust happens, they will be for a while completely powerless, just as in the 30's, and precisely for the same reasons... I think may be the point should be spelled out more clearly. MOnetary authorities have not created enough money over the last 50 years and have prefered to manage through interest rates the rate of private money creation (credit), now they have turned themselves into minor money creators and will prove powerless when credit bust finally happens. Or sth like that. I'll work on sth better some time.
March 5, 2006: The original intent of my edit today was to correct this run-on sentence in the 4th paragraph of the 'Effects of Deflation' section:
However, as I got into the task of editting, I recognized another problem with that paragraph: It conflated two independent causes of deflation. Specifically, it claimed (in the context of a hard-currency economy) that deflation requires "reduction in money stock per person" to be simultaneously "greater than the reduction in prices" brought on by improved production efficiencies. This is demonstrably wrong. A reduction in per-capita money supply does not have to be greater than a concomitant reduction in prices. A reduction in the per-capita money supply is deflationary. A reduction in prices is also deflationary. Ergo, a simultaneous reduction in both is always deflationary, regardless of which one is greater in magnitude at the time. It's only when one of these two deflationary drivers is running counter to the other, that the positive driver must yield a greater effect than the negative one. However, in the original sentence quoted, the example given was for the case where then two effects are running complementarily, rather than counter to each other.
Regardless, I thought it beneficial to give each of these two deflationary drivers their own paragraphs, which I have done. I also separated the anecdote about the 19th century into its own paragraph, and expanded upon it.
-- Mephist0 19:32, 5 March 2006 (UTC)
March 23, 2008: This comment on inflation from the effects of deflation section does not make sense to me:
Consequently, deflation can be thought of as a phantom amplification of a loan's interest rate. (But, conversely, inflation may be thought of as a regressive, across the board general tax.)
Inflation is a flat tax on accumulated wealth, why is it being described as regressive? Nothing in the article on
Inflation describes it a regressive tax.
--
Wallenfe (
talk) 21:20, 23 March 2008 (UTC)
If deflation is happening and the goverment wants to stop it can't they just print more money?
Yes, one could do that, although in the past printing money is typically more dangerous (i.e. volatile) than market operations. Someone asked my econ prof this. Fephisto 02:21, 17 September 2006 (UTC)
No they can't because : Government (public) money creation is very small relative to banks and market (private) money creation. RIght now less than 5% of money supply is made out of central bank money. One can not overnight replace private money by public money, generally private agents resent this as spoilation. Please realise that printing or market operations are included in my remark, both are ways to inject public money in the economy. The problem we face right now is that the ratio of public/private money has never been so small ...
Please explain why you're reverting. Fephisto 05:55, 16 September 2006 (UTC)
In summary, you are editing the article to reflect your minority POV. Stop. JBKramer 06:32, 16 September 2006 (UTC)
It is possible that I'm confusing POV with mPOV, I've been around mostly Austrian Economists lately. Allow me to say the following in defense, however:
Fephisto 02:30, 17 September 2006 (UTC)
No sane economists believes that money authorities control the pace of money creation. Money creation is in private hands now, it's the job of banks and since deregulation of the 80's increasingly in those of the financial markets. So I added the banks.
It is true however that some insane economists adopt as a gross simplification the hypothesis that money authorities control the money supply. However no central bank has ever done it. The history is full of market events driving central banks into reactions that some years later have some effect on the mood of the market. I've never heard of a country with free banking where money supply was in anyways under the control of central banks. So I added banks in the definition section.
The sooner we get the insane economists out of the profession, the better. This is a POV.
I added a line on the neoclassical school, if any turns up, he might try to say what his school has to say about something that happens in the real world and not in its perfect models.
( From JIM : Money creation( money supply ?),Central bank can partially control or affect the money creation through many intruments such as banks ,reserse ratio,regulation ,....But nowadays ,it can not fully control ,because it depends on some other market sector such as preference of people to hold money,demand for loan,....) —Preceding
unsigned comment added by
Jim238 (
talk •
contribs) 15:25, 10 April 2007 (UTC)
The modified version appears to put far too much focus on fringe economic theories. What specific changes need to be made from the longstanding version of the article? JBKramer 16:16, 16 October 2006 (UTC)
Gentlemen,
It should be clear to everyone this edit war is unproductive and not converging toward consensus. Several of you are already in violation of the three revert rule literally as well as in spirit, which "entitles" you to an introductory 24 hour editing block. It behooves you to quickly find the key points of the disagreement and debate those. As an observer, I would expect the winner to incorporate the greatest number of relevant citations.
In the meantime, I recommend the article remain unaltered by the factions. The present version of the article (which contains a Keynesian economics section) seems like it should stand for now. Whether he was right or wrong, certainly John Maynard Keynes was (and is) a major force of the theoretical economic landscape and shouldn't be omitted. — EncMstr 18:22, 16 October 2006 (UTC)
The first paragraph of the definition section says "This generally also means that wages in nominal amounts." I'm guessing that it is missing the word decrease somewhere, but I don't know anything about this stuff so I don't want to guess. Can someone who knows a thing or two fix it?
-- Zarvok | Talk 21:30, 21 January 2007 (UTC)
I am unable to discern any difference, though Disinflation needs significant work and I believe its statements are completely incorrect. Might anyone be able to enlighten me as to any differences? -- Bossi ( talk ;; contribs) 04:12, 5 April 2007 (UTC)
I've made several changes in order to explain the difference between consumption and production goods. Deflation inflation desinflation is only in consumption good prices. So for instance in the 1980's we've had worldwide desinflation and at the same time inflation in the asset prices.
I ve also added comments on Bernanke helicopter drop threat. And reference to the fact that the central banks now print a much smaller part of the money supply in the 1920's
I've written a keynesian explanation of deflation. Implicit reference to samuelson and fisher. I've always wondered how some people can actually believe in monetarism (the money supply has increased way faster than the inflation in good prices, if you don't understand that the rise in asset prices explains the difference you understand nothing) let alone austrians ... Come on who actually believes in markets ? And gold standard !!! Backward as can be. Anyway I suppose an encyclopedia is supposed to allow a diversity of views, so I've just added the keynesian one.
I guess adding a marxist one would be worthwile.
I agree with your point, however I have a problem, in the price index subject in wiki, there's nothing about an asset price index. So right now the definition is misleading since it says that deflation is a fall in the prices of the thing bought or sold (cPI and PPI) but there's nothing about the price of things held and mostly assets. So can we do sth about the general price level ?
Specie or commodity money (gold, silver, shells, whatever) can only opposed to fiat money, notes emitted by an authority entrusted by a legal government. Credit money can happen under a commodity money system (for instance credit money existed during gold standard) or under fiat system. A fiat system is inflationary, as money can be created at will however credit money in itself is not inflationnary. Indeed if too much money is endogeneously created during a boom, it will be destroyed during the bust, so in the long period credit money is neutral. ALl one can say is that as long as the debt/GDP ratio rises, credit money is inflationary, however this debt/GDP raio is rising and falling over time.
THerefore I replaced credit by fiat.
By the way, the reference to theory of quantity of money is misleading. It seems that the equation does not included transactions on stocks of preexisting goods, so it is not an equation that includes all transactions.
- The next, and possibly largest example of deflation, started in 2008 in the United States and may continue for some time.
I removed the above. It didn't belong in the "Causes of Deflation" section. And, while it might turn out to be true, is fairly speculative at this point (Oct. 2, 2008). The current situation is as likely to result in inflation as deflation, if you ask me. —Preceding unsigned comment added by Cbare ( talk • contribs) 20:45, 2 October 2008 (UTC) Fair enough... debt deflation might occur, but I think we're in for a huge correction. - princeton student —Preceding unsigned comment added by 140.180.159.76 ( talk) 00:30, 3 October 2008 (UTC)
I doubt that we're going to experience inflation. What is currently occurring is a destruction of credit, which is shrinking the monetary base and reducing monetary velocity, while also creating demand destruction. That is all deflationary. As fund managers panic and try to raise capital they are liquidating everything, causing huge declines on the stock market, declines in commodity prices, flight out of corporate paper and into treasuries, etc. The dollar is also strengthening against most other currencies other than the Yen (unwinding of the carry trade). And when we look at the stock market, we can interpret this as the market being repriced in terms of more scarce dollars. Similarly, money to buy housing has contracted, so the prices of housing is being repriced (downwards) to reflect the cost of a house in deflated dollars. On the other hand, the next phase of this may be an epidemic of currency crises as other currencies collapse (Iceland being only the first to fall) as capital flees out of emerging economies and into US treasuries. A lot of Austrians are convinced that the US currency must now fail, but I think that is based on religious beliefs rather than sound economic observations. And while we're pumping in $700B, we've destroyed about $5.4T in market value in the Wilshire 5000 and another $3.6T in value of housing which is getting magnified by deleveraging. And who knows how many trillions have evaporated in other areas of the economy that I don't know anything about... Lamontcg ( talk) 07:45, 8 October 2008 (UTC)
Deflation basically happens when production of goods and services grows faster than the amount of money available (or the amount of money shrinks faster than production).
- In the late 19th century the money supply (gold) was relatively fixed while the Industrial Revolution brought a huge increase in the amount of goods available.
- In the Great Depression the failure of businesses and banks, and stricter government regulations, caused a drastic decline in lending, contracting the money supply.
- In Japan in the 1990's the decline of the stock market and real estate decreased banks assets, causing them to also decrease lending.
This is from the Monetarist ( http://www.wikipedia.org/wiki/Monetarism ) point of view, but it seems simpler yet more effective to me in explaining these examples than the theories in the main article.
Tomtul2 ( talk) 07:05, 24 August 2014 (UTC)
The result of the proposal was move the page, per the discussion below. It seems that the economics term is the primary topic here, and there's not currently an encyclopedia article on the deflation of tires and lifejackets, if there's one to be had. Dekimasu よ! 14:44, 13 October 2007 (UTC)
Deflation (economics) → Deflation — Deflation is simply a redirect to Deflation (economics), and there is no other article named like "Deflation (XXXXX)". There is no need to disambiguate. — supernorton 11:18, 8 October 2007 (UTC)
*'''Support'''
or *'''Oppose'''
, then sign your comment with ~~~~
. Since
polling is not a substitute for discussion, please explain your reasons, taking into account
Wikipedia's naming conventions.…4:32 p.m. e.s.t. If deflation has something to do with Commonities and or Product then could Individual people represent the same Matter cause. More of one thing and not enough of the other.
Ok go ahead carry on with that I would like to capture some response from an economical standard point of view.
D.G.DeL_Dorchester Mass ...When and where does what happen 4:35 P.M. E.S.T. David George DeLancey ( talk) 21:36, 18 March 2008 (UTC)revised spelling David George DeLancey ( talk) 13:13, 22 September 2011 (UTC)
wgBold text —Preceding unsigned comment added by 118.95.63.95 ( talk) 10:12, 9 September 2008 (UTC)
I merged "deflationary spiral" with "deflation", redirecting the old entry, as they are obviously the same issue, and thus do not require two separate (and potentially confusing) entires. -- TallulahBelle ( talk) 18:55, 22 November 2008 (UTC)
Any way to make the economics box on the right a little narrower? On my screen it takes up most of the width of the page.
WriterHound ( talk) 09:24, 24 November 2008 (UTC)
Deflation is not a falling of prices. It is a revaluation of a states monetary unit. A falling of prices is simply an effect of deflation. The opening line is therefore plain wrong, and needs to be changed. "Deflation is a contraction of the money supply......An effect of deflation, and how it is often measured, is a general falling of prices." Im no english major, so the wording my not be right, but I am an economics major, and this page is wrong - plain and simple. —Preceding unsigned comment added by 130.207.180.81 ( talk) 02:50, 5 December 2007 (UTC)
Though I'm not an economist, I agree with Lamontcg. I think that credit companies are defrauding customers. It should be made unlawful to not make sure that the ignorant consumer signs a credit contract without knowing its honest terms in plain, all-inclusive language. User:pahawkowl ( User talk:pahawkowl) 15:37, 13 November 2008 (EST)
If governments are so scared of deflation why dont they just counteract it by switching on the printing presses to increace the money supply and therby return the economy to an inflationary state ? 213.40.217.126 ( talk) 22:58, 5 December 2008 (UTC)
PennySeven ( talk) 10:52, 6 December 2008 (UTC)
Whole pages of the introduction drone on and on without citations. I know there are conflicting schools of thought on this subject but at least we can find some sources to represent each side.
(Jediborg) 12:25, 9 January 2009 (UTC) —Preceding unsigned comment added by 98.201.116.49 ( talk)
I strongly oppose the removal of items from article without discussing it first. If I revert the item removed without discussing it, then I will be blocked for "edit warring". The person who removed the item does not get blocked for "edit warring" and for being a "disruptive editor. The person removing the statement without discussing it first, is not labelled a "disruptive editor".
So, let´s discuss this matter. I think the statement: "Deflation is a contraction in the volume of money and credit relative to available goods and services." should stay in the lead since it accurately defines what deflation is.
Discussion regarding all the above matters invited.
PennySeven ( talk) 17:07, 11 January 2009 (UTC)
PennySeven ( talk) 18:02, 11 January 2009 (UTC)
PennySeven ( talk) 18:16, 11 January 2009 (UTC)
PennySeven ( talk) 18:27, 11 January 2009 (UTC)
(I went to my town library on Monday evening and here are the results for Deflation in the economics dictionaries we had:)
Oxford Dictionary of Economics, John Black, 2nd edition, Oxford University Press, 2002, page 112
No entry in the New Palgrave Dictionary of Economics 1987
The Encyclopedic Dictionary of Economics, 3rd edition, The Dushkin Publishing Group, Inc. 1986 Library of Congress number 85-072121, page 52
Another definition from the NYTimes op-ed page contradicts the main definition currently in this article:
I think we need a broader section in this article on competing or contradictory definitions of 'deflation' found in various sources. As with most social science terms, there is no one wholly accepted definition. To keep with the spirit of NPOV, we should represent as many authoritative definitions as is reasonable so that readers understand that there are differing meanings.— Perceval 20:15, 4 May 2009 (UTC)
Don't know how to cite, but here is some source for: "However, historically not all episodes of deflation correspond with periods of poor economic growth" Deflation and Depression: Is There and Empirical Link? http://www.minneapolisfed.org/research/sr/sr331.pdf —Preceding unsigned comment added by 95.88.155.228 ( talk) 21:54, 9 July 2009 (UTC)
There appears to be no mention of décroissance and thus a neutral point of view is not given. That growth is good is not accepted by many. Not least from a Green political perspective. The article should be written with this in mind to make it neutral, or at least a critique where deflation is a good thing rather than always a problem. As there does not seem to be a good link in the english wiokipedia i have added a link to the french wikipedia. Perhaps someone that understands economic theory and an ecological perspective and french can look through to bring these aspects in? The English Décroissance article woudl alse need rewrtting as at the moment its "degrowth" is a bad translation of décroissance. I suggest using the french term as its more accurate. —Preceding unsigned comment added by 92.16.131.114 ( talk) 21:42, 23 December 2008 (UTC)
Green politics are not "mainstream economics", so I can't see how including Green politics perspectives in an economics article would be "NPOV". Mainstream economics is not leftist, green, nor rightist. Though it would be fair to say that it slightly favours neoliberal ideas. In addition, sustainable, non inflationary growth is good - this is accepted by all mainstream economists. 58.105.40.77 ( talk) 10:07, 19 April 2009 (UTC)
NPOV means including all points of view propounded by notable, reliable sources, including those who are in the minority. It definitely doesn't mean restricting the article's POV to what is "mainstream". BillMasen ( talk) 00:16, 20 April 2009 (UTC)
It does not matter if it is mainstream or not, it matters whether it is economics or not. A green political perspective does not belong in an article describing deflation. In defining economic terms, one should always use positive economics, which attempts to describe the world as it is. Normative economics advocates policies or positions that attempt to change the world (by making it better according to one's beliefs). In economic discussions NPOV should not be "mainstream" nor “minorities” nor even notable & reputable, it should simply be describing the world as it is. Deflation should be defined and explained for what it is.
Green economics is by definition normative economics and should be discussed elsewhere. Economic systems, like all systems, cannot be static for any length of time. They either grow or they decline. To say, "That growth is good is not accepted by many", by definition means that those "many people" believe that economic decline is good. Which is fine, I do not disparage (nor endorse) the belief, but economics studies the "efficient allocation of resources", which results in growth. One can talk of sustainable economics, but deflation that cause economic decline is a problem for all economic systems, because economic decline is always a problem. 159.214.124.1 ( talk) 19:26, 23 June 2009 (UTC
It’s too much of a stretch to say green politics are not mainstream. However, décroissance (something like “sustainable stagnation”) is clearly outside of the broad sweep of mainstream economic thinking. I can’t think of any serious support for denying the prospect of improved health, education, safety, livelihood or security to billions of people around the world. The simple truth is that the absence of economic growth kills people who might otherwise live. DOR (HK) ( talk) 04:07, 23 September 2009 (UTC)
Nobody said it "is with the mainstream of economic thinking"; I'm saying that whether it is or it isn't it should be contained in the article. BillMasen ( talk) 12:27, 23 September 2009 (UTC)
I integrated the Bernanke quote into the flow of the article, but I don't actually see the point of having it there. It is from a talk he gave in 2002 where, among other things, he said this: "I believe that the chance of significant deflation in the United States in the foreseeable future is extremely small, for two principal reasons. The first is the resilience and structural stability of the U.S. economy itself. Over the years, the U.S. economy has shown a remarkable ability to absorb shocks of all kinds, to recover, and to continue to grow. Flexible and efficient markets for labor and capital, an entrepreneurial tradition, and a general willingness to tolerate and even embrace technological and economic change all contribute to this resiliency. A particularly important protective factor in the current environment is the strength of our financial system: Despite the adverse shocks of the past year, our banking system remains healthy and well-regulated, and firm and household balance sheets are for the most part in good shape." We now know that most of that is remarkably naive (never mind recent media hype about whether or not we are facing deflation now). So, we have a quote from a naive talk about how to solve deflation placed in a section on the effects of deflation. It doesn't seem to add anything, either. Thoughts? 145.116.8.66 ( talk) 17:02, 21 December 2008 (UTC)
Surely we should be talking about disinflation? Increasing interest rates will lower inflation, and would never actually cause deflation. —Preceding unsigned comment added by 77.44.84.194 ( talk) 08:28, 11 March 2009 (UTC)
On 9 April 2009, Michael93555 ( talk · contribs) removed a section titled "Deflationary spiral", saying "→Deflationary spiral: NO references or sources.". The section said:
Michael is correct that there were no references; and personally, I doubt that such a phenomenon can actually occur. However, there are many links to this section; obviously many people believe in it or at least want to talk about it (if only to reject it). So should we have a section on it anyway? JRSpriggs ( talk) 12:06, 24 June 2009 (UTC)
There is a problem with this phrase in defining "disinflation" within this deflation article. I take slow-down to mean "decreasing". However, if the rate of something decreases, that does not mean that the quantity will decrease. It is like acceleration is the rate of change of velocity. Just because the acceleration is negative does not mean that position will be negative. —Preceding unsigned comment added by Cihan ( talk • contribs) 23:02, 4 October 2009 (UTC)
I have undone the addition of many "citation needed" templates by three sock puppets of banned User:PennySeven, namely: User:NapoleanTheGreat, User:Sallie Little, and User:A bunch of red roses.
If no one replaces the remaining templates by references between now and Tuesday morning next (May 18, 2010), I will conclude that no one intends to provide references. In that case, I will feel free to remove or change the tagged clauses at my discretion. If you object to this procedure, then say so here and now. JRSpriggs ( talk) 06:26, 14 May 2010 (UTC)
Under effects of deflation- Just check: Deflation discourages or encourages bank savings? —Preceding unsigned comment added by 202.166.87.174 ( talk) 15:16, 19 July 2010 (UTC)
I added a bias tag in order to call attention to the very strong bias toward Keynesian economic ideology and words used as moral judgements rather than description of economic processes. 174.101.49.64 ( talk) 02:58, 18 September 2010 (UTC)
This section was deleted as being opinion; however, the argument can be well supported, with much more information and references than originally posted. I wonder if whoever undid it actually read any of the references? The references are first quality. Admittedly parts of the argument the complete argument are outside the field of orthodox economics; however, that is why the argument is important.
Deleted section as follows:
Rising productivity and reduced transportation cost created structural deflation during the peak productivity era of the last quarter of the 19th century until the establishment of the Federal Reserve in 1913. There was inflation during World War I, but deflation returned again after that war and during the 1930s depression. Most nations abandoned the gold standard in the 1930s.
Today there is little reason to expect deflation, aside from the collapse of speculative asset classes, under a fiat monetary system with low productivity growth and depleting resources like oil. The great gains in productivity occurred almost a century ago with electrification and the beginnings of mass production, which expanded on scientific management, followed by internal combustion powered agricultural mechanization and the green revolution. [1]
- - Almost all physical work is now done by machines, with fossil fuel energy exceeding animal and water power by 1870. [2] Application of the American system of manufacturing, which relied on interchangeable parts, machine tools, more efficient factory processes and steam and electrical power, reduced the labor in manufacturing to a minimum. For example, the implementation of Ford's assembly line greatly reduced the cost of building the Model T; however, costs fell relatively slowly after that. Because of agricultural mechanization, at $50 per barrel, the cost of oil represents almost half the cost of growing crops while labor represents a very small percent. At $100 $/bbl oil cost are three quarters the cost of growing crops. Similarly, the cost of cotton represents up to 25% of the cost of producing clothing items in China. Cotton yields have stagnated and the cost of cotton will only increase with higher oil and fertilizer prices.
- - Energy efficiency was a major factor in increasing productivity. While the Newcomen steam engine of 1711 was less than one percent efficient, electricity could be generated and transmitted at 35% efficiency on average in the 1960's, the level today being only slightly higher and near theoretical limits. Also, the efficiencies of manufacturing many basic materials such as steel, aluminum, paper and chemicals are approaching thermodynamic limits. [3]
- [2]
- - Real wages in the U.S. have stagnated since the early 1970's; however, since then nominal prices have increased by a factor of more than 5. [4]
- - The effects of technology on productivity and the economy is a subject of Kondratiev wave thoery. —Preceding unsigned comment added by Phmoreno ( talk • contribs) 17:32, 20 September 2010 (UTC)
The perspective taken by this article suggests that deflation is always a bad thing, but what about deflation due to productivity gains? Nothing wrong with that, is there???????????
-- 206.248.176.147 ( talk) 01:20, 5 May 2010 (UTC)
Deflation is always bad because of Historical Cost Accounting, namely the stable measuring unit assumption, i.e. Japanese accountants assume and all Historical Cost accountants would simply assume that there is no deflation, never was and never will be: they simply assume money is perfectly stable as far as the valuation of constant real value non-monetary items, e.g. companies´ capital and retained profits are concerned exactly the same way as HC accountants simply assume there is no inflation for the same purpose.
Historical Cost accountants´ stable measuring unit assumption it the second enemy in the economy (besides deflation or inflation), but, it is a stealth enemy: it is camouflaged by authorization in International Financial Reporting Standards which state in the Framework, Par 104 (a) "Financial capital maintenance can be measured in either nominal monetary units or in units of constant purchasing power." The second part to the same statement supplies the only and perfect solution, namely, financial capital maintenance in units of constant purchasing power.
Japan is at war with deflation for the last 15 years or more. Japan´s accountants implement the 700 year old generally accepted traditional Historical Cost Accounting model: like the rest of the world - supposedly excluding Venezuela which is in hyperinflation. However nothing can be further from the truth in Venezuela: they still implement HCA - during hyperinflation!!
Back to Japan´s deflation: CNN ran a story of a social website that allows Japanese housewives to almost always buy the lowest price groceries in their area thus driving down prices even more and increasing the deflationary pressure.
Where is the imperfection in the market and what would the perfect market solution in Japan be?
The imperfection in the market is the Historical Cost Accounting model: the Japanese Yen is in deflation. Thus, accounting non-monetary items at their historical costs, i.e. implementing the stable measuring unit assumption meaning Japanese accountants assume there is no deflation in Japan – instead of lowering all non-monetary item values to reflect the increase in the real value of the Yen, maintains the deflation the Bank of Japan is unable to stop because constant real value non-monetary items never updated (decreased in nominal value during deflation to maintain their constant real values constant) are treated like monetary items (cash) by Japanese accountants: thus, their real values increase all the time during deflation.
Deflation creates more real value in money, the Yen, in Japan – because of the monetary nature of money. (Don´t laugh at the expression: it is correct.) :-)
When Japanese accountants stop measuring financial capital maintenance in nominal monetary units, i.e. when they abandon the traditional Historical Cost Accounting model and with it the dreaded stable measuring unit assumption, they will adjust all constant real value non-monetary items´ nominal values with deflation: they will automatically lower the nominal values of salaries - for example, but, the real value of the salaries will remain the same because of deflation in the Yen: it is increasing in real value all the time.
That means that Japanese consumers would stop to gain from delaying their consumption while they wait for deflation to automatically increase the real value of their salaries. The Japanese real or non-monetary economy would stabilise as all non-monetary items would see their values adjusted downwards evenly in the non-monetary or real economy. That would stop deflation.
This cannot happen automatically while Japanese accountants measure financial capital maintenance in nominal monetary units as they have been authorized to do in IFRS in the Framework, Par 104 (a) in 1989. The only way Japanese accountants can stop treating constant real value non-monetary items, e.g. the capital and retained profits of all Japanese companies, like money during deflation, is with financial capital maintenance in constant purchasing power units as they have been authorized in IFRS in the same Framework, Par 104 (a) in 1989. —Preceding unsigned comment added by 93.108.18.28 ( talk) 00:00, 16 May 2010 (UTC)
See Deflation#Deflation in the United States.
Was this article about Deflation as well as the one about Inflation written by a student of Ben Bernanke? If so it is completely off as are the academic theories of Mr Bernanke. His theories are biting dust when faced with reality and particularly the Deflationary one. References to some books that are wrong don't make this article right. Deflation is about monetary base, not prices. The whole article is about CPI, not deflation.
People do get it wrong, sometimes. Milton Friedman’s assertion that “inflation is always and everywhere a monetary phenomenon” is currently being hauled out with the rest of the trash. First-half 2009 US nominal GDP -1.9%, CPI -0.5%, M1 up 14.9%, M2 +9.1%, MZM +11.3% . . . doesn’t add up. DOR (HK) ( talk) 04:19, 23 September 2009 (UTC)
This article is not only incompetent, it assumes a Keynesian bias from the beginning. Some honest soul might undertake to separate out the Keynesian understanding from the Austrian one as exemplified by the Rothbard chapter listed at the bottom. —Preceding unsigned comment added by 71.241.232.106 ( talk) 16:14, 3 July 2010 (UTC)
To 72.228.177.92: Having prices imposed from above by a robotic planning agency (instead of being agreed upon by the seller and buyer) inevitably results in massive waste and widespread shortages. This is seen in every socialist or communist state which has ever existed. JRSpriggs ( talk) 10:05, 7 August 2010 (UTC)
I removed new items added to the subsection Deflation#Basic types of deflation of section Deflation#Causes of deflation. They were not appropriately placed there. The new items were:
These items are too specific to be in this subsection. Asset deflation has to do with what prices are declining, not why they are declining. Re demographics, a declining population should result in less demand for money and thus tend to cause inflation rather than deflation. Also elderly people are usually unemployed and thus produce less goods or services to exchange for money. Hence lower demand for money. Hence inflation. JRSpriggs ( talk) 09:48, 23 September 2010 (UTC)
Excerpt from: http://www.financialsense.com/contributors/james-j-puplava/money-never-sleeps
"In The Great Wave: Price Revolutions and the Rhythm of History, historian David Hackett Fisher described how he found the same sequence in the development of inflationary cycles. They all begin in periods of prosperity and they all end in shattering world crises. They are all preceded by population growth. The inflation first surfaces in a demand and rise in price for life's necessities: food, shelter, and energy. The rapid price rises first appear in the price of food, shelter, and raw materials."
It is reasonable that if population growth is inflationary, then population decline would be disinflationary. Notice I said disinflationary and not deflation because we are dealing in fiat currency. Phmoreno ( talk) 02:16, 26 September 2010 (UTC)
The effects of “good deflation” are better illustrated by using purchasing power of a work hour. Using data from Lebergott (1993), which I approximately converted to 2010 dollars, an hour of work in 1900 bought $3 worth personal consumption expenditures. In 1990 one hour’s work bought $22 worth. Because we can define deflation without any reference to money supply, and because past episodes of deflation occurred during periods of productivity growth, I am beginning to doubt the existence of "bad deflation" as anything but a short term phenomenon. However, I do think the recent and ongoing financial crisis could have caused, or might cause, something different from the past deflations, that is total financial collapse. Phmoreno ( talk) 15:15, 1 October 2010 (UTC)
From the section In the United States
"The deflation of the Great Depression, as in 1836, did not begin because of any sudden rise or surplus in output."
There was a lot of overcapacity from the mid to late 1920s due to mass production. One specific instance is the opening of the Ford River Rouge Complex. Ford's market share had shrunk from 50% to 15% and he was hoping to recapture market share with the Model A. Also, the extensive electric street railway system (that has been completely forgotten in history) started to loose ridership after motor busses and automobiles. See Spurgeon Bell(1922), Beaudreau (1996) and Hounshell (1984).
Productivity had risen so much during the 1920's, just like in the preceding decades, that workers were working too many hours. Hours work did not return to the 1929 levels until WW2. Phmoreno ( talk) 01:59, 18 October 2010 (UTC)
In the article it says that "While an increase in the purchasing power of one's money sounds beneficial, it amplifies the sting of debt. This is because after some period of significant deflation, the payments one is making in the service of a debt represent a larger amount of purchasing power than they did when the debt was first incurred. Consequently, deflation can be thought of as a phantom amplification of a loan's interest rate. If, as during the Great Depression in the United States, deflation averages 10% per year, even a 0% loan is unattractive as it must be repaid with money worth 10% more each year." But I would postulate that this would be too subtle to notice. For example for two years I have been making $200 dollars a month and paid $100 dollars to a bank for a loan. Then for two year deflation happens at 10%. I still pay the same and make the same. So at the end of two years deflation I would have the purchasing power of $120. I think all I would notice is an increase in my purchasing ability, not that I have an opportunity lost because the loan was made at a lower valued dollar. JoeVMI08 ( talk) 13:50, 17 November 2010 (UTC)
An anon removed the below numbered list ( diff.) While I'm not saying the edit is good or bad I think we might want to discuss it. RJFJR ( talk) 14:59, 9 December 2010 (UTC)
The effects of deflation are:
It is unclear what the issue(s) are, please use {{POV-statement}} then detail issues here. This will help address them in a timely manner. - Roy Boy 00:12, 4 December 2011 (UTC)
This article is incomplete without mentioning the Georgist explanation of the credit cycle. Land values fluctuate much more than most goods and services. The example of the so called U.S. housing bubble, that was actually a land bubble, needs to be discussed.
See spreadsheet with structure and land cost for 46 U.S. metro areas:
http://www.lincolninst.edu/subcenters/land-values/metro-area-land-prices.asp
George Soros (2008) talked about the banks being more willing to extend credit for real estate when prices are rising, and less so when prices were falling.
Japan already went through their Georgist downswing and the U.S. and other nations are now starting theirs. This is real asset deflation.
At the peak of the housing bubble structures were about 15% of the value of homes in San Francisco. Today there are cities in the U.S. where the land value of existing houses is about $10,000, having lost more than 70% of its value since 2006. Phmoreno ( talk) 02:59, 5 December 2011 (UTC)
There is little historical basis for deflation harming debtors. It is more a mixed picture. Wages have been more stable than prices so most wage earners benefited, debtors and non-debtors alike. For example the U.S. deflation of 1819-21 was caused by turnpikes lowering transportation costs. Everyone benefited but turnpike investors, mainly because turnpikes were not high return investments. The deflation of 1839-43 was caused by low cotton prices and to a lesser extent low prices of mid-western foodstuffs. Debtors were hurt during the Great Depression. The work week was shortened but hourly wages were fairly stable; the fall in prices allowed workers to maintain constant spending power. Savers were the big losers in the aftermath of the depression as interest rates fell below inflation. Phmoreno ( talk) 16:55, 1 January 2012 (UTC)
As a partial retraction I should say that the deflation of 1839 & 1841 hurt those who borrowed to purchase and clear land to plant cotton and Western feed stuffs, but is was more like a bad investment making the loan harder to replay than blaming the general price level. The cotton crash plus the failure of several large canal projects was a factor in the second worst U.S. depression. Phmoreno ( talk) 04:25, 3 January 2012 (UTC)
In case any of you missed it, Jim Grant gave a speech to the NY Federal Reserve near the end of April 22 in which he succinctly defines deflation:
Deflation is a derangement of debt, a symptom of which is falling prices. In a credit crisis, when inventories become unfinanceable, merchandise is thrown on the market and prices fall.
What deflation is not is a drop in prices caused by a technology-enhanced decline in the costs of production. That’s called progress. Between 1875 and 1896, according to Milton Friedman and Anna Schwartz, the American price level subsided at the average rate of 1.7% a year. And why not? As technology was advancing, costs were tumbling. Long before Joseph Schumpeter coined the phrase “creative destruction,” the American economist David A. Wells, writing in 1889, was explaining the consequences of disruptive innovation.
Grant also discusses financial regulation. Short and excellent. A piece of My Mind by Jim Grant Phmoreno ( talk) 22:10, 17 June 2012 (UTC)
In his General Theory Keynes argued that workers bargain for nominal wages rather than real wages and that this is why during deflation real wages rise while during inflation they decline. Keynes knew the past history of the late 19th century secular deflation and the increase in real wages that occurred. Looking to what has happened to real wages for the average worker, which have been flat since 1973, Keynes may have been right. Perhaps Keynes explained how the wealth disparity grew so that all the productivity gains of recent decades were not equally distributed. Phmoreno ( talk) 23:50, 2 February 2012 (UTC)
Why does price stability direct to deflation? How is a fall in prices represent stability in price?
192.246.234.251 ( talk) 22:33, 12 December 2012 (UTC)Ian (sorry for not being registered).
I removed the following claim from the section Deflation#Causes and corresponding types, uncited since 2010:
There may be good sources for this blanket claim but I could not find them; I did find mentions ( [3] page 13) of deflation causing more cash hoarding though, or qualified claims that it does in a particular non-contemporaneous system ( [4] page 6). I am guessing the connection between saving and deflation is more complex than either one causing the other, so it would be helpful if an expert could phrase a sentence or two, with sources, that explains it to the reader. - 84user ( talk) 16:27, 30 April 2013 (UTC)
A. Gary Shilling discusses deflationary forces here and only indirectly implies an increase in savings is a cause - the paragraph order implies it - but emphasizes that demographic change is a cause and excess "supply is the root cause of deflation." - 84user ( talk) 16:51, 30 April 2013 (UTC)
Ok, I've self-reverted with this diff, as although this is not my area of expertise, the above explanations "make sense". Apologies for the inconvenience. - 84user ( talk) 11:30, 11 May 2013 (UTC)
I've removed an old neutrality tag from this page that appears to have no active discussion per the instructions at Template:POV:
Since there's no evidence of ongoing discussion, I'm removing the tag for now. If discussion is continuing and I've failed to see it, however, please feel free to restore the template and continue to address the issues. Thanks to everybody working on this one! -- Khazar2 ( talk) 00:43, 18 July 2013 (UTC)
Thus we should say, in the first paragraph, that inflation causes currency to lose value over time. This is even more specific when talking about fiat currencies, but since all modern currencies are fiat this is redundant.
68.48.83.107 ( talk) 17:23, 12 November 2013 (UTC)
Are disflation and deflation "exactly" the same thing?
WithGLEE ( talk) 14:20, 16 May 2015 (UTC)
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Cheers.— cyberbot II Talk to my owner:Online 16:42, 22 March 2016 (UTC)
This is not a serious reference, this is some guy's opinion on why stimulus packages don't work.
Example of their opinion: "This is why things like cancer research and alternative energy research have produced only insanely expensive, ineffective results." Can we take someone saying that seriously? Without public funding of cancer research, a lot of cancer drugs would not exist...
The article does not have any evidence to support the author's point of view. I'm not saying it's all wrong, but without evidence, it's a worthless reference. — Preceding unsigned comment added by 24.212.252.210 ( talk) 01:33, 11 June 2016 (UTC)
This is example of not scientific approach in Wiki. e.g.: "Economists generally believe that deflation is a problem in a modern economy because it increases the real value of debt, and may aggravate recessions and lead to a deflationary spiral.[2]"
"Economists generally believe" - what economists - who asked them about it and counted them?
"it increases the real value of debt" - why that is a problem? Calling that a problem is POV. "may aggravate recessions and lead to a deflationary spiral" - That is very tendentious POV on opinion of economists.
Reference [2] to the article "Hummel, Jeffrey Rogers. "Death and Taxes, Including Inflation: the Public versus Economists" (January 2007). [1]" doesn't confirm statement directly or indirectly. Article is about problems with inflation cost calculation, word "deflation" mentioned 2 times, not in context mentioned here. No references to "deflationary spiral" or "aggravation of recessions" whatsoever. I suggest to remove that line, or find better source for that line, or make that under "opinions". If that is opinion, then other opinions needs to be represented, especially opinion of economists.
[7]
Philipp Bagus is a professor of economics at Universidad Rey Juan Carlos.
BAGUS: Yes, yes. And some of the mainstream economists, not the Keynesians, but some mainstream economists, say yes, growth deflation is good and can be allowed. Growth deflation is simply when the productivity increases and more goods and services are produced, and as a consequence prices fall. So this is actually what economies should look like. When people save more, invest in capital goods, there’s free competition, everyone gets richer by just increasing productivity and prices fall, something that should be natural, and something that was more or less natural in the 19th century. We had growth deflation in most of the Western world, so no problem at all. There was high economic growth and price deflation at the same time. Actually one caused the other; economic growth caused the price deflation. But today we are not accustomed to this anymore because we live in a world of never-ending inflation
134.134.139.74 ( talk) 03:03, 9 September 2016 (UTC)
References
{{
cite book}}
: Cite has empty unknown parameter: |coauthors=
(
help)
Removal of well framed commits without particular complaints for each block, isn't a good practice.
https://en.wikipedia.org/?title=Protectionism&type=revision&diff=740276223&oldid=739941833 https://en.wikipedia.org/?title=Deflation&type=revision&diff=738850160&oldid=738647591
Please respect work of other people and if you do edit, at least read what you are editing. Removal of relevant pieces from articles makes it biased.
Citation/opinion that is supplied by link to reliable source MUST be present in linked materials. Otherwise you dis-inform people about citation and subject. Opinions that are not supported by link (e.g. "majority of economists" (who counted? original research?) and/or reliable source can't be part of Wiki Article. Please review Article before and After commit, before you decide to undo whole edit. If edit is problematic but better than original Article undoing it is unreasonable. Make your modifications, clearly communicate your vision of problem with the edit. Support it by evidence, especially if you are removing facts supported by links on reliable sources and restoring speculations.
192.55.54.36 ( talk) 03:16, 20 September 2016 (UTC)
This page is an archive of past discussions. Do not edit the contents of this page. If you wish to start a new discussion or revive an old one, please do so on the current talk page. |
I'm removing
It's not certain at all -- it's a reversal of cause and effect. Also counterfactual comments about people delaying purchases (Keynesian nonsense about consumption driving the economy, as well. Investment is what's important, duh!)
I'm removing this, too:
Again, it's nonsense: in deflationary times, people need less money, so they're not going to increase their cash holdings.
This next is just bad wording:
What is this "rigidity"? If it exists, it's caused by government policy, not the "economy".
I changed "positive effect" to "negative effect" -- the intention of the stated policies is to prevent deflation, i.e., to negate it, not to increase it. The use of the word "positive" was clearly intended to imply that deflation is a bad thing, not that the effect is to drive it, but that's NPOV if anything is.
I removed
for two reasons: (1) it isn't obvious at all, and (2) it's blatantly untrue -- a "deflationary spiral" can only occur until the supply of credit money has been sopped up: the supply of "real" money is a limiting factor. Unlike an inflationary spiral, which can go on effectively without limit.
The answer is known. Some people just don't like it -- they're the ones with the non-neutral POV.
There's still a lot wrong with the article (e.g., the price of cars falling is not deflation! Deflation proper is a fall in the money supply, but price deflation means a general fall in prices, not just the price of cars falling! During deflation, the production costs of the cars will be falling as well, so the factory can still make a profit) 218.101.88.104 05:53, 5 May 2004 (UTC)
As a practicing economist who lived through 68 straight months of falling (year-on-year) consumer prices, I can tell you that large amounts of deflation are as destructive of economic health as large amounts of inflation. People do delay making purchases (the bigger the ticket, the longer the delay) because they know that it will be cheaper, later. My real world experience is in Hong Kong. DOR (HK) ( talk) 05:52, 4 June 2008 (UTC)
These are all problematic. A lot of these are "good economic things to do" but most of them don't have anything to do with deflation.
Other government policy changes that can reduce deflation include:
I agree-- Confuzion 03:23, 14 May 2004 (UTC)
I think this article has grown a bit upwieldy, esp. the tools to fight deflation - the government policy stuff could go on forever if you really wanted to; but I don't really know how effective they are, relatively - also, they may be easily summarized as 1. stimulate economic growth 2. increase consumer confidence 3. legislation to improve capital/labor allocation
Also, is the following statement accurate? I thought that, for the most part, the US economy was mainly, if not completely, still in a mild inflationary state during 2001 to 2004... does anyone actually have facts to back up the statement below about US deflation from 2001 to 2004?-- Confuzion 03:22, 14 May 2004 (UTC)
Minor deflations: Throughout the nations' history, inflation has approached zero and dipped below for a short time (negative inflation is deflation). This was very common in the late 1800's, and even more recently in 2001 through 2004.
Rubbish! The US (and pretty much the whole world) has been inflating massively for years. What are you using to determine recent deflation? The CPI? That's a useless measure, well known to undercount inflation.
This statement is inaccurate: "decrease in the money supply (the M3). If there is less money, each unit of currency becomes more valuable, and this is deflation. When an economy contracts, production is too high and must fall to meet (decreased) demand. However, the capacity to produce often remains the same for a while."
A decrease in the money supply does technically make each unit of currency more valuable but it also must be noted that wages go down at an amount that is equal to the money supply contraction. For instance, if the money supply is cut in half, prices are cut in half but so are wages. Therefore, each unit of currency technically becomes more valuable, but a consumer's spending power will not be increased. I'm changing this statement. -- Dissipate 22:17, 23 Jun 2004 (UTC)
This article needs a complete overhaul. It is very confusing because it does not distinguish between the different types of deflation. If deflation is defined to be a cause (general decrease in prices), all the main causes must be clearly stated. I'm working on an overhaul, it should be done in a few days. -- Dissipate 03:48, 24 Jun 2004 (UTC)
I took this out of the article:
Seriously, this contradicts the paragraph immediately prior to it, and it is hardly a solid economic argument. What this is saying is that bankers dislike an opportunity to charge people higher real interest rates. - Nat Kraus e 05:37, 14 Jun 2005 (UTC)
"Bills and coins now account for less than 5% of the money supply. The printing press is therefore nowadays an ineffective mean. Bernanke, a board member of the US central bank, has made the case that the US central bank (Fed) was ready to drop money from helicopters, finance on a large scale the federal deficits. However this policy has never been implemented so far on a large scale, probably because it is blatantly inflationist and because it hurts all those who profit from the lending business."
Is this not POV? It's confusing in any event. Can someone who knows more than me make an attempt to clean this up? Aplomado 01:49, 1 March 2006 (UTC)
I don't think it is POV. THis is basic facts. I could have written, the printing press and market operations are now ineffective means to boost money supply, I could have written, the central banks are now minor players in the money creation scheme, as soon as the credit bust happens, they will be for a while completely powerless, just as in the 30's, and precisely for the same reasons... I think may be the point should be spelled out more clearly. MOnetary authorities have not created enough money over the last 50 years and have prefered to manage through interest rates the rate of private money creation (credit), now they have turned themselves into minor money creators and will prove powerless when credit bust finally happens. Or sth like that. I'll work on sth better some time.
March 5, 2006: The original intent of my edit today was to correct this run-on sentence in the 4th paragraph of the 'Effects of Deflation' section:
However, as I got into the task of editting, I recognized another problem with that paragraph: It conflated two independent causes of deflation. Specifically, it claimed (in the context of a hard-currency economy) that deflation requires "reduction in money stock per person" to be simultaneously "greater than the reduction in prices" brought on by improved production efficiencies. This is demonstrably wrong. A reduction in per-capita money supply does not have to be greater than a concomitant reduction in prices. A reduction in the per-capita money supply is deflationary. A reduction in prices is also deflationary. Ergo, a simultaneous reduction in both is always deflationary, regardless of which one is greater in magnitude at the time. It's only when one of these two deflationary drivers is running counter to the other, that the positive driver must yield a greater effect than the negative one. However, in the original sentence quoted, the example given was for the case where then two effects are running complementarily, rather than counter to each other.
Regardless, I thought it beneficial to give each of these two deflationary drivers their own paragraphs, which I have done. I also separated the anecdote about the 19th century into its own paragraph, and expanded upon it.
-- Mephist0 19:32, 5 March 2006 (UTC)
March 23, 2008: This comment on inflation from the effects of deflation section does not make sense to me:
Consequently, deflation can be thought of as a phantom amplification of a loan's interest rate. (But, conversely, inflation may be thought of as a regressive, across the board general tax.)
Inflation is a flat tax on accumulated wealth, why is it being described as regressive? Nothing in the article on
Inflation describes it a regressive tax.
--
Wallenfe (
talk) 21:20, 23 March 2008 (UTC)
If deflation is happening and the goverment wants to stop it can't they just print more money?
Yes, one could do that, although in the past printing money is typically more dangerous (i.e. volatile) than market operations. Someone asked my econ prof this. Fephisto 02:21, 17 September 2006 (UTC)
No they can't because : Government (public) money creation is very small relative to banks and market (private) money creation. RIght now less than 5% of money supply is made out of central bank money. One can not overnight replace private money by public money, generally private agents resent this as spoilation. Please realise that printing or market operations are included in my remark, both are ways to inject public money in the economy. The problem we face right now is that the ratio of public/private money has never been so small ...
Please explain why you're reverting. Fephisto 05:55, 16 September 2006 (UTC)
In summary, you are editing the article to reflect your minority POV. Stop. JBKramer 06:32, 16 September 2006 (UTC)
It is possible that I'm confusing POV with mPOV, I've been around mostly Austrian Economists lately. Allow me to say the following in defense, however:
Fephisto 02:30, 17 September 2006 (UTC)
No sane economists believes that money authorities control the pace of money creation. Money creation is in private hands now, it's the job of banks and since deregulation of the 80's increasingly in those of the financial markets. So I added the banks.
It is true however that some insane economists adopt as a gross simplification the hypothesis that money authorities control the money supply. However no central bank has ever done it. The history is full of market events driving central banks into reactions that some years later have some effect on the mood of the market. I've never heard of a country with free banking where money supply was in anyways under the control of central banks. So I added banks in the definition section.
The sooner we get the insane economists out of the profession, the better. This is a POV.
I added a line on the neoclassical school, if any turns up, he might try to say what his school has to say about something that happens in the real world and not in its perfect models.
( From JIM : Money creation( money supply ?),Central bank can partially control or affect the money creation through many intruments such as banks ,reserse ratio,regulation ,....But nowadays ,it can not fully control ,because it depends on some other market sector such as preference of people to hold money,demand for loan,....) —Preceding
unsigned comment added by
Jim238 (
talk •
contribs) 15:25, 10 April 2007 (UTC)
The modified version appears to put far too much focus on fringe economic theories. What specific changes need to be made from the longstanding version of the article? JBKramer 16:16, 16 October 2006 (UTC)
Gentlemen,
It should be clear to everyone this edit war is unproductive and not converging toward consensus. Several of you are already in violation of the three revert rule literally as well as in spirit, which "entitles" you to an introductory 24 hour editing block. It behooves you to quickly find the key points of the disagreement and debate those. As an observer, I would expect the winner to incorporate the greatest number of relevant citations.
In the meantime, I recommend the article remain unaltered by the factions. The present version of the article (which contains a Keynesian economics section) seems like it should stand for now. Whether he was right or wrong, certainly John Maynard Keynes was (and is) a major force of the theoretical economic landscape and shouldn't be omitted. — EncMstr 18:22, 16 October 2006 (UTC)
The first paragraph of the definition section says "This generally also means that wages in nominal amounts." I'm guessing that it is missing the word decrease somewhere, but I don't know anything about this stuff so I don't want to guess. Can someone who knows a thing or two fix it?
-- Zarvok | Talk 21:30, 21 January 2007 (UTC)
I am unable to discern any difference, though Disinflation needs significant work and I believe its statements are completely incorrect. Might anyone be able to enlighten me as to any differences? -- Bossi ( talk ;; contribs) 04:12, 5 April 2007 (UTC)
I've made several changes in order to explain the difference between consumption and production goods. Deflation inflation desinflation is only in consumption good prices. So for instance in the 1980's we've had worldwide desinflation and at the same time inflation in the asset prices.
I ve also added comments on Bernanke helicopter drop threat. And reference to the fact that the central banks now print a much smaller part of the money supply in the 1920's
I've written a keynesian explanation of deflation. Implicit reference to samuelson and fisher. I've always wondered how some people can actually believe in monetarism (the money supply has increased way faster than the inflation in good prices, if you don't understand that the rise in asset prices explains the difference you understand nothing) let alone austrians ... Come on who actually believes in markets ? And gold standard !!! Backward as can be. Anyway I suppose an encyclopedia is supposed to allow a diversity of views, so I've just added the keynesian one.
I guess adding a marxist one would be worthwile.
I agree with your point, however I have a problem, in the price index subject in wiki, there's nothing about an asset price index. So right now the definition is misleading since it says that deflation is a fall in the prices of the thing bought or sold (cPI and PPI) but there's nothing about the price of things held and mostly assets. So can we do sth about the general price level ?
Specie or commodity money (gold, silver, shells, whatever) can only opposed to fiat money, notes emitted by an authority entrusted by a legal government. Credit money can happen under a commodity money system (for instance credit money existed during gold standard) or under fiat system. A fiat system is inflationary, as money can be created at will however credit money in itself is not inflationnary. Indeed if too much money is endogeneously created during a boom, it will be destroyed during the bust, so in the long period credit money is neutral. ALl one can say is that as long as the debt/GDP ratio rises, credit money is inflationary, however this debt/GDP raio is rising and falling over time.
THerefore I replaced credit by fiat.
By the way, the reference to theory of quantity of money is misleading. It seems that the equation does not included transactions on stocks of preexisting goods, so it is not an equation that includes all transactions.
- The next, and possibly largest example of deflation, started in 2008 in the United States and may continue for some time.
I removed the above. It didn't belong in the "Causes of Deflation" section. And, while it might turn out to be true, is fairly speculative at this point (Oct. 2, 2008). The current situation is as likely to result in inflation as deflation, if you ask me. —Preceding unsigned comment added by Cbare ( talk • contribs) 20:45, 2 October 2008 (UTC) Fair enough... debt deflation might occur, but I think we're in for a huge correction. - princeton student —Preceding unsigned comment added by 140.180.159.76 ( talk) 00:30, 3 October 2008 (UTC)
I doubt that we're going to experience inflation. What is currently occurring is a destruction of credit, which is shrinking the monetary base and reducing monetary velocity, while also creating demand destruction. That is all deflationary. As fund managers panic and try to raise capital they are liquidating everything, causing huge declines on the stock market, declines in commodity prices, flight out of corporate paper and into treasuries, etc. The dollar is also strengthening against most other currencies other than the Yen (unwinding of the carry trade). And when we look at the stock market, we can interpret this as the market being repriced in terms of more scarce dollars. Similarly, money to buy housing has contracted, so the prices of housing is being repriced (downwards) to reflect the cost of a house in deflated dollars. On the other hand, the next phase of this may be an epidemic of currency crises as other currencies collapse (Iceland being only the first to fall) as capital flees out of emerging economies and into US treasuries. A lot of Austrians are convinced that the US currency must now fail, but I think that is based on religious beliefs rather than sound economic observations. And while we're pumping in $700B, we've destroyed about $5.4T in market value in the Wilshire 5000 and another $3.6T in value of housing which is getting magnified by deleveraging. And who knows how many trillions have evaporated in other areas of the economy that I don't know anything about... Lamontcg ( talk) 07:45, 8 October 2008 (UTC)
Deflation basically happens when production of goods and services grows faster than the amount of money available (or the amount of money shrinks faster than production).
- In the late 19th century the money supply (gold) was relatively fixed while the Industrial Revolution brought a huge increase in the amount of goods available.
- In the Great Depression the failure of businesses and banks, and stricter government regulations, caused a drastic decline in lending, contracting the money supply.
- In Japan in the 1990's the decline of the stock market and real estate decreased banks assets, causing them to also decrease lending.
This is from the Monetarist ( http://www.wikipedia.org/wiki/Monetarism ) point of view, but it seems simpler yet more effective to me in explaining these examples than the theories in the main article.
Tomtul2 ( talk) 07:05, 24 August 2014 (UTC)
The result of the proposal was move the page, per the discussion below. It seems that the economics term is the primary topic here, and there's not currently an encyclopedia article on the deflation of tires and lifejackets, if there's one to be had. Dekimasu よ! 14:44, 13 October 2007 (UTC)
Deflation (economics) → Deflation — Deflation is simply a redirect to Deflation (economics), and there is no other article named like "Deflation (XXXXX)". There is no need to disambiguate. — supernorton 11:18, 8 October 2007 (UTC)
*'''Support'''
or *'''Oppose'''
, then sign your comment with ~~~~
. Since
polling is not a substitute for discussion, please explain your reasons, taking into account
Wikipedia's naming conventions.…4:32 p.m. e.s.t. If deflation has something to do with Commonities and or Product then could Individual people represent the same Matter cause. More of one thing and not enough of the other.
Ok go ahead carry on with that I would like to capture some response from an economical standard point of view.
D.G.DeL_Dorchester Mass ...When and where does what happen 4:35 P.M. E.S.T. David George DeLancey ( talk) 21:36, 18 March 2008 (UTC)revised spelling David George DeLancey ( talk) 13:13, 22 September 2011 (UTC)
wgBold text —Preceding unsigned comment added by 118.95.63.95 ( talk) 10:12, 9 September 2008 (UTC)
I merged "deflationary spiral" with "deflation", redirecting the old entry, as they are obviously the same issue, and thus do not require two separate (and potentially confusing) entires. -- TallulahBelle ( talk) 18:55, 22 November 2008 (UTC)
Any way to make the economics box on the right a little narrower? On my screen it takes up most of the width of the page.
WriterHound ( talk) 09:24, 24 November 2008 (UTC)
Deflation is not a falling of prices. It is a revaluation of a states monetary unit. A falling of prices is simply an effect of deflation. The opening line is therefore plain wrong, and needs to be changed. "Deflation is a contraction of the money supply......An effect of deflation, and how it is often measured, is a general falling of prices." Im no english major, so the wording my not be right, but I am an economics major, and this page is wrong - plain and simple. —Preceding unsigned comment added by 130.207.180.81 ( talk) 02:50, 5 December 2007 (UTC)
Though I'm not an economist, I agree with Lamontcg. I think that credit companies are defrauding customers. It should be made unlawful to not make sure that the ignorant consumer signs a credit contract without knowing its honest terms in plain, all-inclusive language. User:pahawkowl ( User talk:pahawkowl) 15:37, 13 November 2008 (EST)
If governments are so scared of deflation why dont they just counteract it by switching on the printing presses to increace the money supply and therby return the economy to an inflationary state ? 213.40.217.126 ( talk) 22:58, 5 December 2008 (UTC)
PennySeven ( talk) 10:52, 6 December 2008 (UTC)
Whole pages of the introduction drone on and on without citations. I know there are conflicting schools of thought on this subject but at least we can find some sources to represent each side.
(Jediborg) 12:25, 9 January 2009 (UTC) —Preceding unsigned comment added by 98.201.116.49 ( talk)
I strongly oppose the removal of items from article without discussing it first. If I revert the item removed without discussing it, then I will be blocked for "edit warring". The person who removed the item does not get blocked for "edit warring" and for being a "disruptive editor. The person removing the statement without discussing it first, is not labelled a "disruptive editor".
So, let´s discuss this matter. I think the statement: "Deflation is a contraction in the volume of money and credit relative to available goods and services." should stay in the lead since it accurately defines what deflation is.
Discussion regarding all the above matters invited.
PennySeven ( talk) 17:07, 11 January 2009 (UTC)
PennySeven ( talk) 18:02, 11 January 2009 (UTC)
PennySeven ( talk) 18:16, 11 January 2009 (UTC)
PennySeven ( talk) 18:27, 11 January 2009 (UTC)
(I went to my town library on Monday evening and here are the results for Deflation in the economics dictionaries we had:)
Oxford Dictionary of Economics, John Black, 2nd edition, Oxford University Press, 2002, page 112
No entry in the New Palgrave Dictionary of Economics 1987
The Encyclopedic Dictionary of Economics, 3rd edition, The Dushkin Publishing Group, Inc. 1986 Library of Congress number 85-072121, page 52
Another definition from the NYTimes op-ed page contradicts the main definition currently in this article:
I think we need a broader section in this article on competing or contradictory definitions of 'deflation' found in various sources. As with most social science terms, there is no one wholly accepted definition. To keep with the spirit of NPOV, we should represent as many authoritative definitions as is reasonable so that readers understand that there are differing meanings.— Perceval 20:15, 4 May 2009 (UTC)
Don't know how to cite, but here is some source for: "However, historically not all episodes of deflation correspond with periods of poor economic growth" Deflation and Depression: Is There and Empirical Link? http://www.minneapolisfed.org/research/sr/sr331.pdf —Preceding unsigned comment added by 95.88.155.228 ( talk) 21:54, 9 July 2009 (UTC)
There appears to be no mention of décroissance and thus a neutral point of view is not given. That growth is good is not accepted by many. Not least from a Green political perspective. The article should be written with this in mind to make it neutral, or at least a critique where deflation is a good thing rather than always a problem. As there does not seem to be a good link in the english wiokipedia i have added a link to the french wikipedia. Perhaps someone that understands economic theory and an ecological perspective and french can look through to bring these aspects in? The English Décroissance article woudl alse need rewrtting as at the moment its "degrowth" is a bad translation of décroissance. I suggest using the french term as its more accurate. —Preceding unsigned comment added by 92.16.131.114 ( talk) 21:42, 23 December 2008 (UTC)
Green politics are not "mainstream economics", so I can't see how including Green politics perspectives in an economics article would be "NPOV". Mainstream economics is not leftist, green, nor rightist. Though it would be fair to say that it slightly favours neoliberal ideas. In addition, sustainable, non inflationary growth is good - this is accepted by all mainstream economists. 58.105.40.77 ( talk) 10:07, 19 April 2009 (UTC)
NPOV means including all points of view propounded by notable, reliable sources, including those who are in the minority. It definitely doesn't mean restricting the article's POV to what is "mainstream". BillMasen ( talk) 00:16, 20 April 2009 (UTC)
It does not matter if it is mainstream or not, it matters whether it is economics or not. A green political perspective does not belong in an article describing deflation. In defining economic terms, one should always use positive economics, which attempts to describe the world as it is. Normative economics advocates policies or positions that attempt to change the world (by making it better according to one's beliefs). In economic discussions NPOV should not be "mainstream" nor “minorities” nor even notable & reputable, it should simply be describing the world as it is. Deflation should be defined and explained for what it is.
Green economics is by definition normative economics and should be discussed elsewhere. Economic systems, like all systems, cannot be static for any length of time. They either grow or they decline. To say, "That growth is good is not accepted by many", by definition means that those "many people" believe that economic decline is good. Which is fine, I do not disparage (nor endorse) the belief, but economics studies the "efficient allocation of resources", which results in growth. One can talk of sustainable economics, but deflation that cause economic decline is a problem for all economic systems, because economic decline is always a problem. 159.214.124.1 ( talk) 19:26, 23 June 2009 (UTC
It’s too much of a stretch to say green politics are not mainstream. However, décroissance (something like “sustainable stagnation”) is clearly outside of the broad sweep of mainstream economic thinking. I can’t think of any serious support for denying the prospect of improved health, education, safety, livelihood or security to billions of people around the world. The simple truth is that the absence of economic growth kills people who might otherwise live. DOR (HK) ( talk) 04:07, 23 September 2009 (UTC)
Nobody said it "is with the mainstream of economic thinking"; I'm saying that whether it is or it isn't it should be contained in the article. BillMasen ( talk) 12:27, 23 September 2009 (UTC)
I integrated the Bernanke quote into the flow of the article, but I don't actually see the point of having it there. It is from a talk he gave in 2002 where, among other things, he said this: "I believe that the chance of significant deflation in the United States in the foreseeable future is extremely small, for two principal reasons. The first is the resilience and structural stability of the U.S. economy itself. Over the years, the U.S. economy has shown a remarkable ability to absorb shocks of all kinds, to recover, and to continue to grow. Flexible and efficient markets for labor and capital, an entrepreneurial tradition, and a general willingness to tolerate and even embrace technological and economic change all contribute to this resiliency. A particularly important protective factor in the current environment is the strength of our financial system: Despite the adverse shocks of the past year, our banking system remains healthy and well-regulated, and firm and household balance sheets are for the most part in good shape." We now know that most of that is remarkably naive (never mind recent media hype about whether or not we are facing deflation now). So, we have a quote from a naive talk about how to solve deflation placed in a section on the effects of deflation. It doesn't seem to add anything, either. Thoughts? 145.116.8.66 ( talk) 17:02, 21 December 2008 (UTC)
Surely we should be talking about disinflation? Increasing interest rates will lower inflation, and would never actually cause deflation. —Preceding unsigned comment added by 77.44.84.194 ( talk) 08:28, 11 March 2009 (UTC)
On 9 April 2009, Michael93555 ( talk · contribs) removed a section titled "Deflationary spiral", saying "→Deflationary spiral: NO references or sources.". The section said:
Michael is correct that there were no references; and personally, I doubt that such a phenomenon can actually occur. However, there are many links to this section; obviously many people believe in it or at least want to talk about it (if only to reject it). So should we have a section on it anyway? JRSpriggs ( talk) 12:06, 24 June 2009 (UTC)
There is a problem with this phrase in defining "disinflation" within this deflation article. I take slow-down to mean "decreasing". However, if the rate of something decreases, that does not mean that the quantity will decrease. It is like acceleration is the rate of change of velocity. Just because the acceleration is negative does not mean that position will be negative. —Preceding unsigned comment added by Cihan ( talk • contribs) 23:02, 4 October 2009 (UTC)
I have undone the addition of many "citation needed" templates by three sock puppets of banned User:PennySeven, namely: User:NapoleanTheGreat, User:Sallie Little, and User:A bunch of red roses.
If no one replaces the remaining templates by references between now and Tuesday morning next (May 18, 2010), I will conclude that no one intends to provide references. In that case, I will feel free to remove or change the tagged clauses at my discretion. If you object to this procedure, then say so here and now. JRSpriggs ( talk) 06:26, 14 May 2010 (UTC)
Under effects of deflation- Just check: Deflation discourages or encourages bank savings? —Preceding unsigned comment added by 202.166.87.174 ( talk) 15:16, 19 July 2010 (UTC)
I added a bias tag in order to call attention to the very strong bias toward Keynesian economic ideology and words used as moral judgements rather than description of economic processes. 174.101.49.64 ( talk) 02:58, 18 September 2010 (UTC)
This section was deleted as being opinion; however, the argument can be well supported, with much more information and references than originally posted. I wonder if whoever undid it actually read any of the references? The references are first quality. Admittedly parts of the argument the complete argument are outside the field of orthodox economics; however, that is why the argument is important.
Deleted section as follows:
Rising productivity and reduced transportation cost created structural deflation during the peak productivity era of the last quarter of the 19th century until the establishment of the Federal Reserve in 1913. There was inflation during World War I, but deflation returned again after that war and during the 1930s depression. Most nations abandoned the gold standard in the 1930s.
Today there is little reason to expect deflation, aside from the collapse of speculative asset classes, under a fiat monetary system with low productivity growth and depleting resources like oil. The great gains in productivity occurred almost a century ago with electrification and the beginnings of mass production, which expanded on scientific management, followed by internal combustion powered agricultural mechanization and the green revolution. [1]
- - Almost all physical work is now done by machines, with fossil fuel energy exceeding animal and water power by 1870. [2] Application of the American system of manufacturing, which relied on interchangeable parts, machine tools, more efficient factory processes and steam and electrical power, reduced the labor in manufacturing to a minimum. For example, the implementation of Ford's assembly line greatly reduced the cost of building the Model T; however, costs fell relatively slowly after that. Because of agricultural mechanization, at $50 per barrel, the cost of oil represents almost half the cost of growing crops while labor represents a very small percent. At $100 $/bbl oil cost are three quarters the cost of growing crops. Similarly, the cost of cotton represents up to 25% of the cost of producing clothing items in China. Cotton yields have stagnated and the cost of cotton will only increase with higher oil and fertilizer prices.
- - Energy efficiency was a major factor in increasing productivity. While the Newcomen steam engine of 1711 was less than one percent efficient, electricity could be generated and transmitted at 35% efficiency on average in the 1960's, the level today being only slightly higher and near theoretical limits. Also, the efficiencies of manufacturing many basic materials such as steel, aluminum, paper and chemicals are approaching thermodynamic limits. [3]
- [2]
- - Real wages in the U.S. have stagnated since the early 1970's; however, since then nominal prices have increased by a factor of more than 5. [4]
- - The effects of technology on productivity and the economy is a subject of Kondratiev wave thoery. —Preceding unsigned comment added by Phmoreno ( talk • contribs) 17:32, 20 September 2010 (UTC)
The perspective taken by this article suggests that deflation is always a bad thing, but what about deflation due to productivity gains? Nothing wrong with that, is there???????????
-- 206.248.176.147 ( talk) 01:20, 5 May 2010 (UTC)
Deflation is always bad because of Historical Cost Accounting, namely the stable measuring unit assumption, i.e. Japanese accountants assume and all Historical Cost accountants would simply assume that there is no deflation, never was and never will be: they simply assume money is perfectly stable as far as the valuation of constant real value non-monetary items, e.g. companies´ capital and retained profits are concerned exactly the same way as HC accountants simply assume there is no inflation for the same purpose.
Historical Cost accountants´ stable measuring unit assumption it the second enemy in the economy (besides deflation or inflation), but, it is a stealth enemy: it is camouflaged by authorization in International Financial Reporting Standards which state in the Framework, Par 104 (a) "Financial capital maintenance can be measured in either nominal monetary units or in units of constant purchasing power." The second part to the same statement supplies the only and perfect solution, namely, financial capital maintenance in units of constant purchasing power.
Japan is at war with deflation for the last 15 years or more. Japan´s accountants implement the 700 year old generally accepted traditional Historical Cost Accounting model: like the rest of the world - supposedly excluding Venezuela which is in hyperinflation. However nothing can be further from the truth in Venezuela: they still implement HCA - during hyperinflation!!
Back to Japan´s deflation: CNN ran a story of a social website that allows Japanese housewives to almost always buy the lowest price groceries in their area thus driving down prices even more and increasing the deflationary pressure.
Where is the imperfection in the market and what would the perfect market solution in Japan be?
The imperfection in the market is the Historical Cost Accounting model: the Japanese Yen is in deflation. Thus, accounting non-monetary items at their historical costs, i.e. implementing the stable measuring unit assumption meaning Japanese accountants assume there is no deflation in Japan – instead of lowering all non-monetary item values to reflect the increase in the real value of the Yen, maintains the deflation the Bank of Japan is unable to stop because constant real value non-monetary items never updated (decreased in nominal value during deflation to maintain their constant real values constant) are treated like monetary items (cash) by Japanese accountants: thus, their real values increase all the time during deflation.
Deflation creates more real value in money, the Yen, in Japan – because of the monetary nature of money. (Don´t laugh at the expression: it is correct.) :-)
When Japanese accountants stop measuring financial capital maintenance in nominal monetary units, i.e. when they abandon the traditional Historical Cost Accounting model and with it the dreaded stable measuring unit assumption, they will adjust all constant real value non-monetary items´ nominal values with deflation: they will automatically lower the nominal values of salaries - for example, but, the real value of the salaries will remain the same because of deflation in the Yen: it is increasing in real value all the time.
That means that Japanese consumers would stop to gain from delaying their consumption while they wait for deflation to automatically increase the real value of their salaries. The Japanese real or non-monetary economy would stabilise as all non-monetary items would see their values adjusted downwards evenly in the non-monetary or real economy. That would stop deflation.
This cannot happen automatically while Japanese accountants measure financial capital maintenance in nominal monetary units as they have been authorized to do in IFRS in the Framework, Par 104 (a) in 1989. The only way Japanese accountants can stop treating constant real value non-monetary items, e.g. the capital and retained profits of all Japanese companies, like money during deflation, is with financial capital maintenance in constant purchasing power units as they have been authorized in IFRS in the same Framework, Par 104 (a) in 1989. —Preceding unsigned comment added by 93.108.18.28 ( talk) 00:00, 16 May 2010 (UTC)
See Deflation#Deflation in the United States.
Was this article about Deflation as well as the one about Inflation written by a student of Ben Bernanke? If so it is completely off as are the academic theories of Mr Bernanke. His theories are biting dust when faced with reality and particularly the Deflationary one. References to some books that are wrong don't make this article right. Deflation is about monetary base, not prices. The whole article is about CPI, not deflation.
People do get it wrong, sometimes. Milton Friedman’s assertion that “inflation is always and everywhere a monetary phenomenon” is currently being hauled out with the rest of the trash. First-half 2009 US nominal GDP -1.9%, CPI -0.5%, M1 up 14.9%, M2 +9.1%, MZM +11.3% . . . doesn’t add up. DOR (HK) ( talk) 04:19, 23 September 2009 (UTC)
This article is not only incompetent, it assumes a Keynesian bias from the beginning. Some honest soul might undertake to separate out the Keynesian understanding from the Austrian one as exemplified by the Rothbard chapter listed at the bottom. —Preceding unsigned comment added by 71.241.232.106 ( talk) 16:14, 3 July 2010 (UTC)
To 72.228.177.92: Having prices imposed from above by a robotic planning agency (instead of being agreed upon by the seller and buyer) inevitably results in massive waste and widespread shortages. This is seen in every socialist or communist state which has ever existed. JRSpriggs ( talk) 10:05, 7 August 2010 (UTC)
I removed new items added to the subsection Deflation#Basic types of deflation of section Deflation#Causes of deflation. They were not appropriately placed there. The new items were:
These items are too specific to be in this subsection. Asset deflation has to do with what prices are declining, not why they are declining. Re demographics, a declining population should result in less demand for money and thus tend to cause inflation rather than deflation. Also elderly people are usually unemployed and thus produce less goods or services to exchange for money. Hence lower demand for money. Hence inflation. JRSpriggs ( talk) 09:48, 23 September 2010 (UTC)
Excerpt from: http://www.financialsense.com/contributors/james-j-puplava/money-never-sleeps
"In The Great Wave: Price Revolutions and the Rhythm of History, historian David Hackett Fisher described how he found the same sequence in the development of inflationary cycles. They all begin in periods of prosperity and they all end in shattering world crises. They are all preceded by population growth. The inflation first surfaces in a demand and rise in price for life's necessities: food, shelter, and energy. The rapid price rises first appear in the price of food, shelter, and raw materials."
It is reasonable that if population growth is inflationary, then population decline would be disinflationary. Notice I said disinflationary and not deflation because we are dealing in fiat currency. Phmoreno ( talk) 02:16, 26 September 2010 (UTC)
The effects of “good deflation” are better illustrated by using purchasing power of a work hour. Using data from Lebergott (1993), which I approximately converted to 2010 dollars, an hour of work in 1900 bought $3 worth personal consumption expenditures. In 1990 one hour’s work bought $22 worth. Because we can define deflation without any reference to money supply, and because past episodes of deflation occurred during periods of productivity growth, I am beginning to doubt the existence of "bad deflation" as anything but a short term phenomenon. However, I do think the recent and ongoing financial crisis could have caused, or might cause, something different from the past deflations, that is total financial collapse. Phmoreno ( talk) 15:15, 1 October 2010 (UTC)
From the section In the United States
"The deflation of the Great Depression, as in 1836, did not begin because of any sudden rise or surplus in output."
There was a lot of overcapacity from the mid to late 1920s due to mass production. One specific instance is the opening of the Ford River Rouge Complex. Ford's market share had shrunk from 50% to 15% and he was hoping to recapture market share with the Model A. Also, the extensive electric street railway system (that has been completely forgotten in history) started to loose ridership after motor busses and automobiles. See Spurgeon Bell(1922), Beaudreau (1996) and Hounshell (1984).
Productivity had risen so much during the 1920's, just like in the preceding decades, that workers were working too many hours. Hours work did not return to the 1929 levels until WW2. Phmoreno ( talk) 01:59, 18 October 2010 (UTC)
In the article it says that "While an increase in the purchasing power of one's money sounds beneficial, it amplifies the sting of debt. This is because after some period of significant deflation, the payments one is making in the service of a debt represent a larger amount of purchasing power than they did when the debt was first incurred. Consequently, deflation can be thought of as a phantom amplification of a loan's interest rate. If, as during the Great Depression in the United States, deflation averages 10% per year, even a 0% loan is unattractive as it must be repaid with money worth 10% more each year." But I would postulate that this would be too subtle to notice. For example for two years I have been making $200 dollars a month and paid $100 dollars to a bank for a loan. Then for two year deflation happens at 10%. I still pay the same and make the same. So at the end of two years deflation I would have the purchasing power of $120. I think all I would notice is an increase in my purchasing ability, not that I have an opportunity lost because the loan was made at a lower valued dollar. JoeVMI08 ( talk) 13:50, 17 November 2010 (UTC)
An anon removed the below numbered list ( diff.) While I'm not saying the edit is good or bad I think we might want to discuss it. RJFJR ( talk) 14:59, 9 December 2010 (UTC)
The effects of deflation are:
It is unclear what the issue(s) are, please use {{POV-statement}} then detail issues here. This will help address them in a timely manner. - Roy Boy 00:12, 4 December 2011 (UTC)
This article is incomplete without mentioning the Georgist explanation of the credit cycle. Land values fluctuate much more than most goods and services. The example of the so called U.S. housing bubble, that was actually a land bubble, needs to be discussed.
See spreadsheet with structure and land cost for 46 U.S. metro areas:
http://www.lincolninst.edu/subcenters/land-values/metro-area-land-prices.asp
George Soros (2008) talked about the banks being more willing to extend credit for real estate when prices are rising, and less so when prices were falling.
Japan already went through their Georgist downswing and the U.S. and other nations are now starting theirs. This is real asset deflation.
At the peak of the housing bubble structures were about 15% of the value of homes in San Francisco. Today there are cities in the U.S. where the land value of existing houses is about $10,000, having lost more than 70% of its value since 2006. Phmoreno ( talk) 02:59, 5 December 2011 (UTC)
There is little historical basis for deflation harming debtors. It is more a mixed picture. Wages have been more stable than prices so most wage earners benefited, debtors and non-debtors alike. For example the U.S. deflation of 1819-21 was caused by turnpikes lowering transportation costs. Everyone benefited but turnpike investors, mainly because turnpikes were not high return investments. The deflation of 1839-43 was caused by low cotton prices and to a lesser extent low prices of mid-western foodstuffs. Debtors were hurt during the Great Depression. The work week was shortened but hourly wages were fairly stable; the fall in prices allowed workers to maintain constant spending power. Savers were the big losers in the aftermath of the depression as interest rates fell below inflation. Phmoreno ( talk) 16:55, 1 January 2012 (UTC)
As a partial retraction I should say that the deflation of 1839 & 1841 hurt those who borrowed to purchase and clear land to plant cotton and Western feed stuffs, but is was more like a bad investment making the loan harder to replay than blaming the general price level. The cotton crash plus the failure of several large canal projects was a factor in the second worst U.S. depression. Phmoreno ( talk) 04:25, 3 January 2012 (UTC)
In case any of you missed it, Jim Grant gave a speech to the NY Federal Reserve near the end of April 22 in which he succinctly defines deflation:
Deflation is a derangement of debt, a symptom of which is falling prices. In a credit crisis, when inventories become unfinanceable, merchandise is thrown on the market and prices fall.
What deflation is not is a drop in prices caused by a technology-enhanced decline in the costs of production. That’s called progress. Between 1875 and 1896, according to Milton Friedman and Anna Schwartz, the American price level subsided at the average rate of 1.7% a year. And why not? As technology was advancing, costs were tumbling. Long before Joseph Schumpeter coined the phrase “creative destruction,” the American economist David A. Wells, writing in 1889, was explaining the consequences of disruptive innovation.
Grant also discusses financial regulation. Short and excellent. A piece of My Mind by Jim Grant Phmoreno ( talk) 22:10, 17 June 2012 (UTC)
In his General Theory Keynes argued that workers bargain for nominal wages rather than real wages and that this is why during deflation real wages rise while during inflation they decline. Keynes knew the past history of the late 19th century secular deflation and the increase in real wages that occurred. Looking to what has happened to real wages for the average worker, which have been flat since 1973, Keynes may have been right. Perhaps Keynes explained how the wealth disparity grew so that all the productivity gains of recent decades were not equally distributed. Phmoreno ( talk) 23:50, 2 February 2012 (UTC)
Why does price stability direct to deflation? How is a fall in prices represent stability in price?
192.246.234.251 ( talk) 22:33, 12 December 2012 (UTC)Ian (sorry for not being registered).
I removed the following claim from the section Deflation#Causes and corresponding types, uncited since 2010:
There may be good sources for this blanket claim but I could not find them; I did find mentions ( [3] page 13) of deflation causing more cash hoarding though, or qualified claims that it does in a particular non-contemporaneous system ( [4] page 6). I am guessing the connection between saving and deflation is more complex than either one causing the other, so it would be helpful if an expert could phrase a sentence or two, with sources, that explains it to the reader. - 84user ( talk) 16:27, 30 April 2013 (UTC)
A. Gary Shilling discusses deflationary forces here and only indirectly implies an increase in savings is a cause - the paragraph order implies it - but emphasizes that demographic change is a cause and excess "supply is the root cause of deflation." - 84user ( talk) 16:51, 30 April 2013 (UTC)
Ok, I've self-reverted with this diff, as although this is not my area of expertise, the above explanations "make sense". Apologies for the inconvenience. - 84user ( talk) 11:30, 11 May 2013 (UTC)
I've removed an old neutrality tag from this page that appears to have no active discussion per the instructions at Template:POV:
Since there's no evidence of ongoing discussion, I'm removing the tag for now. If discussion is continuing and I've failed to see it, however, please feel free to restore the template and continue to address the issues. Thanks to everybody working on this one! -- Khazar2 ( talk) 00:43, 18 July 2013 (UTC)
Thus we should say, in the first paragraph, that inflation causes currency to lose value over time. This is even more specific when talking about fiat currencies, but since all modern currencies are fiat this is redundant.
68.48.83.107 ( talk) 17:23, 12 November 2013 (UTC)
Are disflation and deflation "exactly" the same thing?
WithGLEE ( talk) 14:20, 16 May 2015 (UTC)
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Cheers.— cyberbot II Talk to my owner:Online 16:42, 22 March 2016 (UTC)
This is not a serious reference, this is some guy's opinion on why stimulus packages don't work.
Example of their opinion: "This is why things like cancer research and alternative energy research have produced only insanely expensive, ineffective results." Can we take someone saying that seriously? Without public funding of cancer research, a lot of cancer drugs would not exist...
The article does not have any evidence to support the author's point of view. I'm not saying it's all wrong, but without evidence, it's a worthless reference. — Preceding unsigned comment added by 24.212.252.210 ( talk) 01:33, 11 June 2016 (UTC)
This is example of not scientific approach in Wiki. e.g.: "Economists generally believe that deflation is a problem in a modern economy because it increases the real value of debt, and may aggravate recessions and lead to a deflationary spiral.[2]"
"Economists generally believe" - what economists - who asked them about it and counted them?
"it increases the real value of debt" - why that is a problem? Calling that a problem is POV. "may aggravate recessions and lead to a deflationary spiral" - That is very tendentious POV on opinion of economists.
Reference [2] to the article "Hummel, Jeffrey Rogers. "Death and Taxes, Including Inflation: the Public versus Economists" (January 2007). [1]" doesn't confirm statement directly or indirectly. Article is about problems with inflation cost calculation, word "deflation" mentioned 2 times, not in context mentioned here. No references to "deflationary spiral" or "aggravation of recessions" whatsoever. I suggest to remove that line, or find better source for that line, or make that under "opinions". If that is opinion, then other opinions needs to be represented, especially opinion of economists.
[7]
Philipp Bagus is a professor of economics at Universidad Rey Juan Carlos.
BAGUS: Yes, yes. And some of the mainstream economists, not the Keynesians, but some mainstream economists, say yes, growth deflation is good and can be allowed. Growth deflation is simply when the productivity increases and more goods and services are produced, and as a consequence prices fall. So this is actually what economies should look like. When people save more, invest in capital goods, there’s free competition, everyone gets richer by just increasing productivity and prices fall, something that should be natural, and something that was more or less natural in the 19th century. We had growth deflation in most of the Western world, so no problem at all. There was high economic growth and price deflation at the same time. Actually one caused the other; economic growth caused the price deflation. But today we are not accustomed to this anymore because we live in a world of never-ending inflation
134.134.139.74 ( talk) 03:03, 9 September 2016 (UTC)
References
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cite book}}
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help)
Removal of well framed commits without particular complaints for each block, isn't a good practice.
https://en.wikipedia.org/?title=Protectionism&type=revision&diff=740276223&oldid=739941833 https://en.wikipedia.org/?title=Deflation&type=revision&diff=738850160&oldid=738647591
Please respect work of other people and if you do edit, at least read what you are editing. Removal of relevant pieces from articles makes it biased.
Citation/opinion that is supplied by link to reliable source MUST be present in linked materials. Otherwise you dis-inform people about citation and subject. Opinions that are not supported by link (e.g. "majority of economists" (who counted? original research?) and/or reliable source can't be part of Wiki Article. Please review Article before and After commit, before you decide to undo whole edit. If edit is problematic but better than original Article undoing it is unreasonable. Make your modifications, clearly communicate your vision of problem with the edit. Support it by evidence, especially if you are removing facts supported by links on reliable sources and restoring speculations.
192.55.54.36 ( talk) 03:16, 20 September 2016 (UTC)