Inflation is defined as increase in prices in the future. Stuff tomorrow is more expensive than today. Over last 20 years U.S. inflation has been at about 3.5 % per annum. Predictable inflation can be " factored" in the priece of projects/labor and goods. Since price are going to be high in the future, I want to buy things today. Remember all of these runs on banks and shops in Brazil and other places ( high future rates).
Deflation is the opposite: prices tomorrow are going to be lower that today. Hence, consumers will wait for yet lower prices and not buy today. Manufacturer are force to lower prices to entise consumers. It's a dead spiral down. Central banks have to force spending somehow. Japanese have been in this mess since 1987, when the real estate market collapse and hence all of banks/companies balance sheets. Most large companies own each other in Japan. U.S, Reserve bank has been worried about it for about 2 years. They even planned dollar bills that have time stamp on them (would force consumers to spend it or loose it). Intrest rate can not go any lower. Discount rate is about 1.5%. This is nominal, real intrest rates are lower by the inflation rate. Hence, we are basicly at a negative intrest rates. Easy, is it?

posted by 32.100.162...

• OT: Economics ... Deflation worries, J, Sat, 14 Dec 2002 11:43:15
  • The supply of 'new' money does not necessarily..., Jon in Chicago, Tue, 17 Dec 2002 13:34:53
    • Oh, maybe better explained..., Jon in chicago, Tue, 17 Dec 2002 14:44:15
      • 1) I agree with what you're saying ..., J, Tue, 17 Dec 2002 15:19:52
        • Re: 1) I agree with what you're saying ..., Jon in Chicago, Tue, 17 Dec 2002 16:28:21
    • I don't understand reason for sarcasm, but ..., J, Tue, 17 Dec 2002 14:31:59
  • Some Misunderstandings....., Alex C, Sat, 14 Dec 2002 23:43:42
    • Nixon took dollar off of gold standard years ago., J, Sun, 15 Dec 2002 00:56:28
    • Re:J, you original q was about deflation?, Jon906, Sun, 15 Dec 2002 00:32:02
      • Alright ... there isn't a simple answer, but I did ..., J, Sun, 15 Dec 2002 01:33:20
      • Do you live in Ithaca, NY? Lovely part of country ..., J, Sun, 15 Dec 2002 01:05:48
      • thanks. it makes more sense now. n/m, J, Sun, 15 Dec 2002 00:52:16
  • Deflation worries>> VERY long, K-9, Sat, 14 Dec 2002 18:54:26
    • The word you are all looking for...and more... (LONG), Jeff Malin, Mon, 16 Dec 2002 22:19:16
      • Thank you... and... I hope "fiat" money is better than, K-9, Tue, 17 Dec 2002 14:42:52
      • You get a B-. Your answer was good, but it answered, J, Mon, 16 Dec 2002 23:23:19
        • What to do next, Jeff Malin, Wed, 18 Dec 2002 15:47:28
    • O.K ..., J, Sat, 14 Dec 2002 21:13:56
      • Improving Economics Education, economic barometer, Wed, 2 May 2012 12:54:31
      • Re: O.K ..., K-9, Mon, 16 Dec 2002 13:56:04
  • Re: OT: Economics ... Deflation worries, Ed MA, Sat, 14 Dec 2002 15:32:56
  • Re: OT: Economics ... Deflation worries, bRAD, Sat, 14 Dec 2002 12:25:59
    • Re: Deflation_big problem., Jon906, Sat, 14 Dec 2002 13:27:11 <-- Viewing This Message
      • So, why not print money?, J, Sat, 14 Dec 2002 14:14:54
        • OT: Economic theory worries.............., zeke, Sat, 14 Dec 2002 19:09:19
          • Deflation is created by too much of a good thing?, J, Sat, 14 Dec 2002 21:37:22
          • Zeke, question for you>, K-9, Sat, 14 Dec 2002 19:36:43
            • Higher Ed' opportunities in MA....., zeke, Sun, 15 Dec 2002 07:38:33
              • Zeke, thanks for the info, K-9, Mon, 16 Dec 2002 14:02:11
        • Re: So, why not print money?, Ian Glenday , Sat, 14 Dec 2002 16:51:20
          • Ian Ian Ian ... you should answer the casting call for, J, Sat, 14 Dec 2002 21:28:09
  • It's certainly hurt the used vehicle market..., b.flippo, Sat, 14 Dec 2002 12:23:49

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