What is deflation?
The question what is deflation is easy to answer. But, defining the word is different than understanding the threat – because widespread public ignorance of the effects of deflation and the deflationary spiral makes deflation a menacing risk now more than ever.
Define Deflation and InflationWebster's says, "Inflation is an increase in the volume of money and credit relative to available goods," and "Deflation is a contraction in the volume of money and credit relative to available goods." To understand inflation and deflation, we must understand money and credit.
Define Money and CreditMoney is a socially accepted medium of exchange, value storage and final payment. A specified amount of that medium also serves as a unit of account.
According to its two financial definitions, credit may be summarized as a right to access money. Credit can be held by the owner of the money, in the form of a warehouse receipt for a money deposit, which today is a checking account at a bank. Credit can also be transferred by the owner or by the owner's custodial institution to a borrower in exchange for a fee or fees – called interest – as specified in a repayment contract called a bond, note, bill or just plain IOU, which is debt. In today's economy, most credit is lent, so people often use the terms "credit" and "debt" interchangeably, as money lent by one entity is simultaneously money borrowed by another.
After the deflationary depression......................hyperinflation...... that is when the commodities prices fly............... The end.
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