Headlines from today's (Dec. 18) WSJ. "LOW INFLATION TESTS WORLD'S CENTRAL BANKS. Subdued Prices Persist Despite Years of Easy Money. Deflation Still a Threat."
Central banks fear low inflation since it can lead to actual deflation, which is difficult to control.
The huge and growing total of world debt is basically deflationary since it takes increased savings and money to carry debt. In other words, debt swallows up savings and earnings and is deflationary. If you want to slow down a business, load it with debt.
Aside from debt, the entrance into the world's economic system of the third world, Asia and China meant a huge increase in the planet's supply of goods. Thus, as a monumental stream of new goods and merchandise entered the world economic system, prices were forced down, and all of this empowered the forces of deflation.
What to do? During the Great Depression, FDR chose to fight deflation by re-setting ... Log in or subscribe to continue reading.
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