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Deflation is not a threat. Its just prices returning to normal after the collapse of largest bubble in human history. And its not over. Housing prices will b

• btilly 16y ago
  If deflation was just happening in housing, I might agree. But it is not. The problem is that deflation is happening across the board. The price of food. The price of clothing. The price of furniture. All are affected. Most of those products were not part of the bubble, but all are impacted by changes in the money supply. The real problem comes when people get used to deflation and start counting on it. In that environment people don't think, "I have 10,000 dollars, what can I invest it in?" Instead they think, "I have 10,000 dollars, imagine how much more I can buy with that next year!" And when you kill investment, all sorts of bad things happen. For instance in the short term companies stop growing, stop hiring, and you are likely to get prolonged periods of high unemployment. And in the long term you have reduced productivity.
  • SHOwnsYou 16y ago
    A lot of the decline in prices in food and furniture and other items that have to be transported is due to the oil bubble in 2008. An easy example is milk. It now costs less than in did in 2008 because gas is so much cheaper.
  • grandalf 16y ago
    I think you're getting hung up on the idea of a deflationary spiral. We are not anywhere close to that.