Comments | the_recession: On the Solidifying Deflation, Dating the 2007 Recession, and Depressions

cieldumort in the_recession

On the Solidifying Deflation, Dating the 2007 Recession, and Depressions

May 27, 2010 22:59

As mentioned before, data continues to build strongly that the US has indeed been sliding into a textbook deflationary downdraft, literally our first since the 1930s. Deflations generally sap the ability of economies to snap back from downturns, and in addition to making for subdued recoveries, also usually leaving them quite vulnerable to future ( Read more... )

coincident indicators, money supply, credit crisis, m3, definition of recession, keynesianism, leading indicators, deflation, gdi

Comments 5

ytterbius May 28 2010, 05:55:09 UTC

Thanks for keeping us up to date!

cieldumort May 28 2010, 06:42:07 UTC

Yeah - they're pretty interesting articles - I'm happy to share them.

capthek May 28 2010, 21:48:42 UTC

But wait, according to foxnews the only real worry is inflation and deflation is awesome!

On a more serious note, Brian Berry and other cycle theorists do suggest that the growth that comes after a deflationary recession tends to be stronger than after an inflationary stagflation. That does not help things right now of course, but some years in the future it does mean the boom will be larger because prices fell rather than surged in the short term. In someways though it feels like we are getting some bad elements of both inflation and deflation going on.

Deflation is also better for wages, if you want to think of good points. Again, that does not really help the overall economy immediately I know.

cieldumort May 29 2010, 01:27:22 UTC

Deflation is only better for wages if it is not the kind of deflation, as we have had for a while now, that comes along with stagnant or falling wages.

How many people do you know that got raises over the past two years (without it being tied to something like a promotion)? How many people do you know who are out of work and looking at jobs that are offering them even higher salaries now for the same work they lost sometime in the past year or two? etc.

capthek May 30 2010, 17:55:14 UTC

Oh yes, we both know very well that people are not getting raises these days. But I think we both also know that deflation does not result in people getting raises but rather the price of goods and services going down compared to the value of their wages. Don't get me wrong, I am not going to start singing, "happy days are here again" or anything. I am merely pointing out what deflation means for the pocketbook and wider economy.