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To: jiggyboy
there are no ready examples of economies completely wrecked by deflation

I believe the Great Depression is considered to be the poster child of an economy wrecked by deflation.

8 posted on 08/12/2010 9:58:26 AM PDT by ClearCase_guy
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To: ClearCase_guy

I’m thinking mostly in terms of how the economy went bad. It wasn’t a continuing deflation that wrecked the economy in the 1930’s; the stock market crash in 1929 took people’s imaginary money away first and deflation was the result.

I’m thinking a healthy economy that had no deflation, then deflation that was kinda noticeable, then became something that everybody just accepted as a way of life, and then got worse and worse, and then the economy collapsed.


18 posted on 08/12/2010 10:19:32 AM PDT by jiggyboy (Ten per cent of poll respondents are either lying or insane)
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To: ClearCase_guy

Japan had deflation or stagflation.


21 posted on 08/12/2010 10:27:09 AM PDT by outpostinmass2
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To: ClearCase_guy
I believe the Great Depression is considered to be the poster child of an economy wrecked by deflation.

It may be considered the poster child, but it wasn't. The prices of goods did fall because of the contraction in the money supply, but Hoover and FDR forced wages to remain high -- that was the cause for the disaster. Business saw profits squeezed to the point of bankruptcy.

If prices and wages are both allowed to fall together, the net result is that nothing has changed. Profits don't fall because the cost of production goods (and labor) have fallen, too. The author is correct -- deflation without government interference is not harmful.

42 posted on 08/12/2010 11:45:33 AM PDT by BfloGuy (It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect . . .)
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