Deflation explained

[Dover]

I wanted to become more familiar with what deflation means and its implications so I looked it up:


In economics, deflation is a decrease in the general price level of goods and services.<1> Deflation occurs when the annual inflation rate falls below zero percent (a negative inflation rate), resulting in an increase in the real value of money – allowing one to buy more goods with the same amount of money. This should not be confused with disinflation, a slow-down in the inflation rate (i.e. when inflation declines to lower levels).<2> As inflation reduces the real value of money over time, conversely, deflation increases the real value of money – the functional currency (and monetary unit of account) in a national or regional economy.

Currently, economists generally believe that deflation is a problem in a modern economy because of the danger of a deflationary spiral (explained below).<3> Deflation is correlated with recessions including the Great Depression, as banks defaulted on depositors. Additionally, deflation may cause the economy to enter the liquidity trap. However, historically not all episodes of deflation correspond with periods of poor economic growth.<4>

cont'd

http://en.wikipedia.org/wiki/Deflation

[customerserviceguy]

1. Deflation is clearly what's happening in the housing market

And we will not hit the rock bottom of this recession/depression until the right price level is reached in real estate. Funny numbers pretending that a recession is over, or tax credit tricks that attempt to do CPR on the housing bubble only push that day further off into the future.

[dixiegrrrrl]

2. Deflation is NOT what is happening in the grocery store.

"Hidden inflation" is happening there.
Smaller packages of less content for the same price.
Or just good old fashioned prices increases, like coffee, which was 4.00 for a plastic tub of Maxwell House last year and is now 10.00 this week, same store.