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What’s the Difference Between Deflation and Hyperinflation? Why do you ask?
Deflation is a general decrease in the prices of goods and services (GDP), which increases the real value of money.
That’s a strange concept. We haven’t had deflation, have we – the Fed and Treasury are still printing more devalued money, aren’t they?
Yes they are, but the collapse of credit from Shadowbanks like GM and GE Credit and banks tightening up their lending standards made money disappear faster than the government could borrow or print it.
In fact, our economy, even with a +3.5% Q3 GDP, contracted almost –12% year over year.
That is the classic textbook definition of deflation and depression.
Depression? – Why haven’t I heard, read or seen this in the news?
Maybe the media masters don’t want to alarm people who remember older relatives talking about the Great Depression that lasted for decades including World War II.
Economists may fear a deflationary spiral and liquidity trap.
These mean no matter how much credit or money are made available, people do not borrow or spend because they are tapped out. They put off buying because they know prices are going down.
So what causes deflation? Why do bills and costs of living keep going up?
There are lags in different parts of the economy as people think it’s business as usual. Some keep borrowing and spending, corporations scramble to catch up with costs by layoffs, and governments try to replace falling income, property and sales taxes by borrowing more, raising user fees and increasing advance fee and tax withholding.
Cost of living basically rises because of government borrowing and taxes, while the standard of living falls. Government is not only out of money – it never really had any money but what it borrowed or taxed from producers. Government may be forced slowly by economic reality to do everything it can to reduce costs, cut benefits, means testing, reducing COLA adjustments; even layoffs, cutting corruption and waste.
Eventually costs of living may fall to reflect deflationary depression economic Jubilee Generation reality.
