5/8 People talk about controlling inflation but accept it as the norm,
that as long as it's below a certain percentage (5%) then we're ok.
Are there countries with DEFLATION, and what bearing does it have
on the economy?
\_ Okay, let's say you have controlled inflation ... rising wages,
cheap imported good, rising real estate values which you can
take equity loans on, everyone with all this money buying stuff,
Now take deflation ... prices falling, people not wanting to buy
because they expect prices to be lower, wages stagnating, real
estate dropping, loans coming due for companies but not being
able to pay them because no one's buying, etc ...
Japan.
business raking in all the dough and hiring more people.
Now take deflation ... wages stagnating, prices falling, people
buying less because they have no extra money, real estate values
dropping, loans coming due for companies but not being able to
make payments because no one's buying, banks eating it because
of all the defaulted loans and reluctant to make more loans,
the company's that are left not hiring much, etc. ... Japan.
\- i deleted my more extended comments but i dont think many
economists would say inflation is ok up to 5%, althought
like with say body fat, it's not really a case of lower is
better all the waay down to 0. something closer to 1-2%
miight be ideal. as with something like weight gain,
deflation can have different causes. prices can fall
because of productivity gains in a flat money supply
[say if specie backed] and example being the industrial
revolution. a massive demand shock accompanied by
scarcity [like say the BLACK DEATH] can also cause
pretty interesting economic turbulence. BTW, the current
fed head BERNANKE has a lot on the record about the BoJ's
policies. |
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