Deflation: Feeling down

Posted: February 20, 2015 in economy
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UK Only Article: 
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The great fracturing

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Deflation can be a good thing. But today’s version is pernicious

FALLING prices sound like something to cheer. In 1950 talk was not cheap. It cost $3.70 to place a five-minute call between New York and San Francisco—or $36.35 in today’s money. Now that same call costs you nothing. The emergence of the sharing economy is driving down the price of a taxi ride and a bed for the night. More recently tumbling prices for natural resources, especially oil, have boosted the spending power of consumers from Detroit to Delhi. Mark Carney, the governor of the Bank of England, reckons that falling energy prices are “unambiguously good” for the British economy. Mr Carney is not wrong. Nonetheless, the world is grievously underestimating the danger of deflation.
The problem is that aggregate prices are dipping in so many places at once. Deflationary pressures are visible far beyond food and energy, and in countries that cannot claim to be leading the charge towards the new economy. In …<div class="og_rss_groups"></div>

via Economic Crisis


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