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Friday, 26 June 2009

Who is deflation bad for and why?

Money talks, and says no to deflation.
Lately, I've often heard, mostly from members of the upper class, there's a serious threat of deflation looming on the horizon.

But I'm at a loss to understand why 'sustained falls in prices for goods and services' should necessarily be considered a blight, when precisely the efforts to reverse inflation apparently have always been high on every single government's list of good intentions.

As for us mere mortals, deflation means buying cheaper, although I haven't noticed any drop in prices as yet when I go shopping. Conversely, it's inflation that puts a lot of strain on families as prices and salaries don't rise at the same pace. Actually, the prices of the things I usually buy keep going up, so a fear of deflation seems a kind of propaganda aimed at stimulating consumption.

Besides, deflation would most likely make the blown-out-of-proportion prices get closer to value for money.

Or maybe it's just that the rich worry over the slightest decrease in their profits growth. Couldn't the leading economies just be kept going without either inflation or deflation (like they say it is in Switzerland)?

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