no smart guy. we needed to start from there because i think we understand differently both concepts. inflation and deflation are increases in the money supply or decreases in the money supply. rising prices or declining prices has nothing to do with inflation and deflation. Prices going down or up......are not universally a good or a bad thing. The cause of going in either direction let us know if it is a positive sign or a negative one. I hope my understanding on this matter helps you when you Google your stuff.
Great. You've laid out brief definitions of inflation and deflation. Now please explain to me how my analysis of a deflationary period is wrong. I don't think you can, because I think my analysis is correct. Hint - there is a reason why central banks have an inflation target of 0%-2%. And it's not so government can control our lives through inflation.
I am with Kass on this, in terms of the dangers of deflation... Moreover, defining inflation/deflation as change in money stock (which aggregate, btw?) is completely misguided, in my view. Especially so in a global modern economy.
LOL my mistake. I didn't realize I was dealing with one of those government conspiracy types. I guess all central banks are in on this scam together, and have been for a very long time... Kudos to you for discovering their covert plan.
There is no Fed double standard, they never claimed there was deflation(Just mentioning this word would roil the markets), IIRC all they talked about was that there were risks prices would stay below what could be considered 'price stability'
Indeed. A more accurate definition would to simply say increasing/decreasing asset values. Both of which can be combated through monetary policy, of which money supply is a tool.
Deflation for a debtor nation that owes most of its debt to foreign entities is a disaster. It would result in returning to your creditors more buying power than you borrowed. In a nation of savers (Japan), where the creditors are largely internal, deflation is not as onerous. In the US, however, it would be disastrous, and so the Fed will see to it that we have ample inflation. We will not have deflation in the US (barring a total collapse of course, which is always a possibility, but not very likely.) Inflation is a godsend to debtors with long term fixed rate loans.
Right on. And also worth pointing out that deflation is usually in tandem with increased currency value, which can hurt an export driven economy, which the U.S. is obviously not. Just sayin'.