The money supply plunged 29% during the Great Depression as a result of the Federal Reserve constricting the money supply. The result: the Consumer Price Index (CPI) declined 27%.
Japan's economy has suffered for over 10 years from the effects of deflation. So far, we have experienced a little deflation in the middle of this crisis but the CPI has not deflated to the extremes of the Great Depression mainly because the government is deficit spending and the Federal Reserve is insuring liquidity in the market place by many different actions (low interest rates, lending facilities of many newly invented types).
Look at housing, however, where deflation is major and a stumbling block to future recovery efforts. Some areas of the country have seen housing prices deflate by 50% or more. A bottom in the housing market (and also in the retail markets and the commercial markets) are necessary before a full, vibrant recovery can take place. Sometimes government intervention prevents the economy from reaching the bottom but it is necessary that we get there.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.