How Deflation Works
Though steadily falling prices over a prolonged period sounds like a good thing, deflation is the ultimate vicious cycle. When the money supply decreases due to tight credit, a terrible cascade of negative reactions ensues, often leading to severe economic contraction, recession, or depression. If there is too little money circulating in the economy, demand for goods drops, as do prices. If companies sell less at a lower profit, they cut back on manufacturing of existing products and development of new ones. They eventually are forced to release workers. Unemployed workers spend even less on consumer goods, so demand and prices dip even lower. More layoffs occur, and the negative cycle deepens. This book is an invaluable guide to this most dangerous of economic cycles and offers the power of knowledge, helping readers to adapt to shifting economic trends with comprehension, historical perspective, and sound advice and strategies.
What people are saying - Write a review
We haven't found any reviews in the usual places.
Other editions - View all
able asset bubble bankruptcy borrowing money business cycle cash cause central bank circulation companies consumer price index consumer spending costs debt decrease deflation occurs deflationary period deflationary spiral deposits Depression disinflation economic crisis economic downturn economic growth economic recovery economic trends example falling prices FDIC Federal Reserve System fiscal policy given price hurt impact increase the money inflation and deflation investments investors iPhone less money losing lower interest rates lower prices lower profits monetary policy money increases money supply nomic oversupply people’s percent period of deflation Policy makers possibility of deflation prevent price index price levels production profits for businesses rate of inflation real estate recession reduce repay Reserve’s result Retrieved August 2009 sell signs of deflation stabilize prices stock market crash Stock market indexes supply and demand sustained take hold take out loans tion trend of falling Unemployment levels United worry