Deflation (deflation): When the market is the currency in circulation decreased, reducing the people's money income, purchasing power declined, affecting the prices down, resulting in deflation. Long-term monetary tightening will inhibit investment and production, leading to higher unemployment and economic recession. Deflation (deflation) how to define? According to the Nobel laureate in economics, Samuelson's definition: "a general decline in prices and costs are, that is deflation." Economists generally believe that when the consumer price index (cpi) fallen for three months, means that deflation has occurred. Deflation is excess capacity or lack of demand led to prices, wages, interest rates, food, energy and other prices continued to fall. In economic practice, to determine whether a period of falling prices is deflation, a look at the consumer price index (CPI) is changed from positive to negative, and second, to see whether this decline continued over a certain time limit. Some academics have also broken down into deflation and deflation, disinflation, the former turned negative sign of the CPI, which is the price index decreased compared with the previous year; the latter is marked by a continuous decline in CPI, which the chain price index monthly decline in a row .
Translated by Google
Deflation - the causes
(A) the total lack of demand caused by deflation (B) the deflation caused by excess supply of absolute Japan's economic crunch is the focus of world attention. The Fed has recently published a paper together from the writings of many well-known economist's article, "to prevent deflation - the experience of the 1990s from Japan school homework (Preventing Defiation; Lessons from Japan's experence in the 1990s). The article describing the economic contraction in Japan from the 1980s economic bubble. And today the situation is quite similar to the United States. Japan's deflation began in 1999, due to imbalance between supply and demand, commodity prices. The drop in prices on the one hand to reduce corporate profits, it also inhibited consumption. The article also mentioned that the main cause of Japan's economic contraction, Japan's central bank to cut interest rates without a positive and relaxing the monetary policy to stimulate Japan's economic growth. Terrible economic contraction, except Japan, have been gradually forming in the world trend in the past six months, France, Germany, Brazil, Switzerland, the prices are also falling. Even the fast-growing mainland China, prices will inevitably fall of its fate. In the past five years, China price has dropped about 20%, prices in Hong Kong in the past five years has dropped by about 16%. Some economists have begun to expect the U.S. economy has plunged into the possibility of deflation. Morgan Stanley's chief economist Luo Qi (Srephen Roach) said, "The U.S. has been hovering at the edge of economic contraction." America's current "low inflation, low economic growth," economic conditions, there may turn into deflation. Low inflation and deflation of the distance of only a thin line. How to prevent the U.S. from the realm of low inflation into deflation, it is the government's primary duty. Optimists say that there are: the current deflation is more often than in the 1930s is small, because - because the central bank was the main policy failures; and today the service industry is relatively high, it is more labor-intensive, price (wage) is more difficult to cut. Deflation is not necessarily bad: nineteenth century, such as the prices are based on the rapid increase in productivity, it can sync with economic growth.
Translated by Google
Deflation - effects
(A) the impact of deflation on economic growth 1, to promote back on: deflation will curb economic growth or even recession the economy. Reasons: ① producer prices continued to decline will reduce profits or even losses, and consequently reduce production or shutdown. ② prices continued to fall damaged the debtor will in turn affect production and investment ③ prices continued to drop, production will lead to reduced investment income to reduce unemployment, exacerbated by lack of aggregate demand 2, to promote the theory: moderate deflation is conducive to economic growth. Reasons: ① deflation will lead to long-term interest rates will help business investment to improve facilities and increase productivity. ② In the state of moderate deflation, economic expansion can be extended without threatening economic stability. ③ If deflation and technological progress, improved efficiency linked, then the decline in price levels and economic growth can be mutually reinforcing. (B) the redistribution of wealth and income benefits of deflation 1, the holder of damage to physical as_set_s, cash as_set_s will appreciate. 2, fixed-rate benefit of creditors, the debtor damage. 3, deflation to reduce corporate profits, part of the transfer of wealth to the residents; deflation, real interest rates to rise in corporate debt, income and further transfer to individuals. 4, the government transfer of wealth to the public → real debt increase the lender to reduce expenditure, sale of as_set_s, earnings decline → cut labor costs and then, lenders income and as_set_ prices fall → lender loans increased in real terms, the economy reduced demand (cycle start). Mathematical analysis from basic economics, deflation is due to excessive supply and demand caused by insufficient. Positive way to solve the deflation, should boost the domestic effective demand as a priority, supplemented by the government with the expansion of public spending, it is expected to ease the threat of deflation.
Translated by Google
Deflation - the pros and cons
In general, the moderate deflation, by increasing competition in the market, to help adjust the economic structure and squeeze the economy "bubble" will also encourage enterprises to strengthen technology investment and technological innovation, improve product and service quality, economic development have a positive effect of the side. However, excessive deflation will lead to the general price level for a long time, large-scale decline, the market liquidity tight, the velocity of money slows down, sluggish sales, the impact of production and investment enthusiasm, and strengthen the people "to buy up not to buy off "psychological, so the company's" pity vote "and residents of the" pity purchases ", a large number of idle funds, limiting the effective growth of social demand, resulting in sluggish economic growth, economic growth rates, the long-term economic development and people's adverse long-term interests of the masses. From this, the deflation of the economy have a negative side. To this end, we must increase the intensity of government investment to stimulate domestic demand and curb falling prices, keeping prices stable. In contrast to inflation, deflation means that consumers increased purchasing power, but to continue would result in the debt burden, business investment returns, negative consumer spending, the state economy may fall into recession, falling prices and economic interaction, the grave situation of a vicious cycle . Harm is done in deflation: prices fell, but individuals and businesses in the dark increased liabilities because the real value of as_set_s held shrunk, while the bank's mortgage lending has not decreased. For example, people mortgage buyers, buyers who may have a deflation of property value, far less than they assumed debt.
Translated by Google
Deflation - cycle
→ real debt increase the lender to reduce expenditure, sale of as_set_s, earnings decline → cut labor costs and then, lenders income and as_set_ prices fall → lender loans increased in real terms, the economy reduced demand (cycle start). Mathematical analysis from basic economics, deflation is due to excessive supply and demand caused by insufficient. Positive way to solve the deflation, should boost the domestic effective demand as a priority, supplemented by the government with the expansion of public spending, it is expected to ease the threat of deflation.
Translated by Google
Deflation - Governance
(A) loose monetary policy A loose monetary policy, can increase the amount of money in circulation, thereby stimulating aggregate demand. (B) loose fiscal policy Expand fiscal spending, can directly increase the total demand, but also through investment of the "multiplier effect" driven by private investment. (C) the structural adjustment Because the products of industry or a certain level of commodity deflation caused by excess production of the absolute, the general structural adjustment means a reduction of excess production sector or industry, to encourage the development of new sectors or industries. (D) the expected change Government through various promotional means to increase public confidence in future economic development trends. (E) improving the social security system Establish a sound social security system, appropriate to improve the distribution pattern of national income, increase in the lower income levels and consumption levels, in order to increase consumer demand. (F) tightening model of malignant National Composite Consumer Price Index, issued only with a considerable amount of national currency, the appreciation of the consequences of unlimited money, such as the Warring States Period, Qi knife coins, when Wang Mang usurped the Han issued legal tender.
Translated by Google
Book "deflation"
Translator: Li Yang, etc. Author: [United States] Xilin ISBN: 9787801188731 Pages: 450 Price: 28.0 Publisher: Economic Management Publishing House Binding: Paperback Publication: 1999-10-1 Introduction On money supply and the relationship between monetary policy and deflation, the book has many details of the theory. In summary, the author focuses primarily on three important points. One is the relationship between inflation and deflation: the author believes that inflation gave birth to deflation; the other is self-reinforcing deflationary nature: the same as inflation, deflation is self-reinforcing; The third is deflation of the measures: the author first analyzes the United States since the 1980s successive financial crises. Author A · Gary Xilin: Graduated from 阿姆荷斯特 School with a physics degree, then at Stanford University, master's and doctorate in economics. After graduation, she served as Standard Oil of the United States and Canada, economic analysts, chief economist at Merrill Lynch, China Te Weide's executive vice president and chief economist, and so on. Has published "inflation over? Are you ready? "" The world has completely changed, "" After the big shock is the depression or recession? "," Deflation "and 6 monographs. After the publication of these books in the United States, are sensational bestseller.
Translated by Google
百科 Daquan
tonghuo jinsuo Deflation deflation Refers to the amount of money in circulation during the contraction or slow growth rate notes issued to raise money or reduce the purchasing power of paper money devaluation level. It is the capitalist countries in serious fiscal deficits and inflation used in a policy. The main measures to increase revenue, reduce budget spending, freeze wages, increase the discount rate and the contraction of credit. Historically, deflation and economic cycles are closely linked. When the reproduction of the capitalist economy is in boom cycle stage, bank credit, commercial credit and general expansion of consumer credit, loose money market, money supply is full. Once when the economic crisis, the bank in order to avoid the risk of long-term loans usually stop, raise the discount rate, and to press companies to return money; businesses owed sales generally stop requiring shelf; suddenly appeared on the market that tight monetary deflation, leading to the drop in prices, production declines, increased unemployment, increased the severity of the economic crisis. This deflation, only when the crisis stage and the Great Depression of the past, into the recovery stage can be relaxed. After World War II, capitalist countries in the reproduction of capitalism, deflation is not necessarily closely linked to cycles of change, in fact, has become a bourgeois government to reduce hyperinflation and adopted a response. Characteristics of deflation has changed, it does not necessarily mean that the absolute amount of the money supply reduction is no longer evident in the general price level fell, but the growth rate of money supply and inflation rate slowed down. This is because the world economic crisis since the 1930s and the rise of Keynesianism, Western countries have state intervention in the economy, the implementation of fiscal deficit as against economic recession and stimulate economic growth magic. At the same time, the major capitalist countries have abandoned the gold standard, make notes and gold decoupling, in order to use a lot of notes issued to make up the deficit. In this context, to reduce the absolute amount of the money supply becomes very difficult, but can only reduce the money supply growth rate. Therefore, even if the crisis stage in the economic cycle, the general price level does not drop, so that the inflation rate will decline. Some Western economists to the phenomenon known as "price rigidity", and it attributed to costs, especially wages "sticky" and even accused the trade unions in negotiating for higher wages in the "monopoly" status caused. This is actually to blame inflation proletarian who is a distortion of the reality of capitalism. In fact, the so-called "price rigidity" is a capitalist country, but the implementation of Keynesian deficit financing policy consequences. Redistribution of national income due to inflation of the monopoly bourgeoisie benefit, plus they can not find other ways to stimulate the economy, fiscal deficit, money supply expansion can not completely abandon the policy, the trend of prices will be difficult to suppress. Although deflation policy could temporarily suppress the momentum of hyperinflation and soaring prices, but also to the new capitalist economic development of resistance. Because the decline in money supply growth rate will rise in interest rates, resulting in increased investment costs and investment size shrinks, so that economic hardship. To raise interest rates may also lead to an increase in international capital flows, domestic currency appreciation. This will not only intensify the contradictions between the capitalist countries, but also to implement the country's export of deflation in commodity prices, imported goods prices, making exports less imports, international trade deficit, have to further tighten the implementation of income adjustment policies, increased the extent of economic difficulties. Capitalist countries to implement long-term policy of Keynesian deficit financing, inflation and economic stagnation caused by the coexistence of "stagflation" situation and had to turn to use the dual policy of inflation and deflation, the inflation consequences of attempting to be passed on to working people head to ease the economic crisis of capitalism. Facts have proved that deflation as an emergency expedient, although the inflation rate temporarily decreased, but it does not really solve the problem. Large fiscal deficit still exists, the expansion of international trade deficit and rising unemployment, at any time may force re-implementation of the so-called capitalist countries "loose" monetary policy, leading to new inflation. This shows that the capitalist countries in overcoming the crisis on its own has been caught in a dilemma dilemma. (Li Qingyun)