A little deflation can be fine, good even. Inflation oscillated around 0 for most of American history and our economy did great.
Most gut aversion to deflation comes from great depression PTSD.
Most gut aversion to deflation comes from great depression PTSD.
- Panic of 1785
- Copper Panic of 1789
- Panic of 1792
- Panic of 1796–1797
- 1802–1804 recession
- Depression of 1807
- 1812 recession
- 1815–1821 depression
- 1822–1823 recession
- 1825–1826 recession
- 1828–1829 recession
- 1833–1834 recession
- 1836–1838 recession
- 1839–1843 recession
- 1847–1848 recession
- 1853–1854 recession
- Panic of 1857
- 1860–1861 recession
- 1865–1867 recession
- Panic of 1873 (which lasted until 1879)
- Depression of 1882–1885
- 1887–1888 recession
- 1890–1891 recession
- Panic of 1893
- Panic of 1896
- 1899–1900 recession
- 1902–1904 recession
- Panic of 1907
- Panic of 1910–1911
- Recession of 1913–1914
But besides that we did fine.
2. Nearly all of them were relatively minor and recovered on their own
3. Now make a list of all the economic disasters that have happened under fiat money / central bank / pro-inflation policies.
Ideally the economy oscillates between periods of low inflation and low deflation. This would reflect natural business cycles.
- 1981-1982 recession, caused by the oil crisis a few years before, had 10.8% peak unemployment
- The Great Recession (again, there was deflation here) with 10% peak unemployment.
- COVID, which had a 14.7% peak unemployment for a few months before the US made a smooth landing.
That's it.
Is it that the American ascent to becoming the richest economy on earth wasn’t perfectly smooth and therefore not “fine”?
I've heard it said that the British pound was worth the same in 1914 as in 1614.
This process is self-perpetuating and can get out of hand very quickly.