Deflation – Loan Finance and Money

Deflation – Loan Finance and Money

Period of deflation

Period of deflation

Deflation is the price reduced, the opposite of inflation. In economic science, a period of deflation indicates continued, generally falling prices. http://adkoutreach.org has details

Economic crisis even more devastating

Economic crisis even more devastating

Historical deflation in some cases triggered the economic crisis even more devastating than hyperinflation. Deflation occurs when weak demand outpaces the market. With falling prices is also losing income from capital and labor. Companies must reduce or close, while workers become unemployed or must accept a lower pay. The falling revenues give a stronger effect on the decline in demand. At the same time increase the price also drop the value. With the general expectation of additional price, people will tend to stock up to fetch the potential wealth gains. The result can be a very large decline in production and consumption.

This happened with the economic depression of the 1930s. The situation then led to new break in economic theory. They recommended state intervention to boost demand in the economy.

Suffered heavily from a deflationary trend

Suffered heavily from a deflationary trend

The Japanese economy, in the years since 1990, has suffered heavily from a deflationary trend. This situation arose in the wake of a housing bubble that ended in a major cut and loss of wealth.


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