{"id":24200,"date":"2017-06-23T07:49:08","date_gmt":"2017-06-23T12:49:08","guid":{"rendered":"http:\/\/olduvai.ca\/?p=24200"},"modified":"2017-06-23T07:49:08","modified_gmt":"2017-06-23T12:49:08","slug":"four-reasons-central-banks-are-wrong-to-fight-deflation","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=24200","title":{"rendered":"Four Reasons Central Banks are Wrong to Fight Deflation"},"content":{"rendered":"

Four Reasons Central Banks are Wrong to Fight Deflation<\/a><\/h3>\n

\"dollar-1029742_960_720.jpg\"<\/h3>\n
The word \u201cdeflation\u201d can be defined in various ways. According to the most widely accepted definition today, deflation is a sustained decrease of the price level. Older authors have often used the expression \u201cdeflation\u201d to denote a decreasing money supply, and some contemporary authors use it to characterize a decrease of the inflation rate. All of these definitions are acceptable, depending on the purpose of the analysis. None of them, however, lends itself to justifying an artificial increase of the money supply.<\/div>\n
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The harmful character of deflation is today one of the sacred dogmas of monetary policy. The champions of the fight against deflation usually present six arguments to make their case.1<\/a> One, in their eyes it is a matter of historical experience that deflation has negative repercussions on aggregate production and, therefore, on the standard of living. To explain this presumed historical record, they hold, two, that deflation incites the market participants to postpone buying because they speculate on ever lower prices. Furthermore, they consider, three, that a declining price level makes it more difficult to service debts contracted at a higher price level in the past. These difficulties threaten to entail, four, a crisis within the banking industry and thus a dramatic curtailment of credit. Five, they claim that deflation in conjunction with \u201csticky prices\u201d results in unemployment. And finally, six, they consider that deflation might reduce nominal interest rates to such an extent that a monetary policy of \u201ccheap money,\u201d to stimulate employment and production, would no longer be possible, because the interest rate cannot be decreased below zero.<\/p>\n

However, theoretical and empirical evidence substantiating these claims is either weak or lacking altogether.2<\/a>\u00a0First, in historical fact, deflation has had no clear negative impact on aggregate production.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Four Reasons Central Banks are Wrong to Fight Deflation The word \u201cdeflation\u201d can be defined in various ways. According to the most widely accepted definition today, deflation is a sustained decrease of the price level. Older authors have often used the expression \u201cdeflation\u201d to denote a decreasing money supply, and some contemporary authors use it […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[61,202,15414,7617,6541,536,13347,954,15415],"class_list":["post-24200","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banking","tag-deflation","tag-jorg-guido-hulsmann","tag-mises-institute","tag-monetary-theory","tag-money","tag-money-and-banks","tag-money-supply","tag-price-level"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24200","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=24200"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24200\/revisions"}],"predecessor-version":[{"id":24201,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/24200\/revisions\/24201"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=24200"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=24200"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=24200"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}