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Thanks for that chart, Tom. Deflaton is often portrayed as a near disaster, yet curiously the sky hasn’t fallen in Switzerland.
And in Britain there was basically no inflation between 1800 and 1900: at least the price of bread in 1900 was the same as it had been in 1800. Thus the periods of inflation in the 1800s were matched by equal and opposite periods of deflation.
Yet the 1800-1900 period was a period of economic growth unmatched in the entire course of human history, i.e. the industrial revolution took place largely in that century.
I’m not advocating zero inflation: i.e. I go along with the standard 2% inflation target. But deflation is not the disaster it’s often claimed to be.
Also shows you can't counter this or, "create" inflation with monetary policy, which the SNB has been trying to do for the past three years.
Only fiscal will do and like everyone else, the Swiss still pretty much choose austerity although there are some ballot initiatives that could change that. (Universal minimum income.)
There is good deflation and bad deflation. Good deflation is a byproduct of advancing technology that makes labor power more productive and reduces the unit cost of labor. By contrast, bad inflation comes about as a consequence of the growth of paper capital in the form of mortgages, business and household loans far out pacing the ability of productive assets (plant, machinery & equipment) in the real economy to maintain the payment streams demanded by paper capital.
4 comments:
Thanks for that chart, Tom. Deflaton is often portrayed as a near disaster, yet curiously the sky hasn’t fallen in Switzerland.
And in Britain there was basically no inflation between 1800 and 1900: at least the price of bread in 1900 was the same as it had been in 1800. Thus the periods of inflation in the 1800s were matched by equal and opposite periods of deflation.
Yet the 1800-1900 period was a period of economic growth unmatched in the entire course of human history, i.e. the industrial revolution took place largely in that century.
I’m not advocating zero inflation: i.e. I go along with the standard 2% inflation target. But deflation is not the disaster it’s often claimed to be.
Also shows you can't counter this or, "create" inflation with monetary policy, which the SNB has been trying to do for the past three years.
Only fiscal will do and like everyone else, the Swiss still pretty much choose austerity although there are some ballot initiatives that could change that. (Universal minimum income.)
But deflation is not the disaster it’s often claimed to be.
Depends on the level of private debt and who is holding it. See debt deflation.
There is good deflation and bad deflation. Good deflation is a byproduct of advancing technology that makes labor power more productive and reduces the unit cost of labor. By contrast, bad inflation comes about as a consequence of the growth of paper capital in the form of mortgages, business and household loans far out pacing the ability of productive assets (plant, machinery & equipment) in the real economy to maintain the payment streams demanded by paper capital.
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